Credit Losses Based on Accounts Receivable - Maxwell, Inc. analyzed its accounts receivable balances at December 31 and arrived at the ages balances listed below, along with the percentage that is estimated to be uncollectible:
Age Group Balance Probability of Noncollection
0-30 days past due $100,000 1
31-60 days pas due 18,000 3
61-120 days past due 20,000 6
121-180 days past due 7,000 10
Over 180 days past due 2,000 20
$147,000
The company handles credit losses with the allowance method. The credit balance of the Allowance for Doubtful Accounts is $840 on December 31, before any adjustments.
a. Prepare the adjusting entry for estimated credit losses on December 31.
b. Prepare the journal entry to write off Porter Company's account on the following May 12, in the amount of $480.