Response to the following problem:
Zajic Corp. had the following transactions relating to uncollectible accounts during 2016:
Feb. 15 Wrote off F. Young's account of $200 as uncollectible
Apr. 30 Collected from G. Yopek Inc. $100 that had been written off in 2015
June 26 Received $300 from Wong Machine Ltd. (Wong's previous balance was $700); no further payments are expected and the balance was written off
Sept. 7 Wrote off H. Wolfe's account of $350
Dec 31 Analysed accounts receivable, revealing the following:
a. Accounts to be written off:
S. Wuff $300
P. Levesque 400
T. White 100
b. Ageing of accounts receivable:
Age (days) Accounts receivable Estimated loss percentage
1-30 20,000 2%
31-60 12,000 4%
61-90 5,000 5%
91-120 3,000 10%
Over 120 10,000 50%
Total $ 50,000
Required:
1. Assume that there was a credit balance of $1,735 in the Allowance for Doubtful Accounts general ledger account at December 31, 2015. Prepare the entry to write off the uncollectible accounts at December 31, 2016.
2. Prepare the appropriate adjusting entry to set up the required balance in the Allowance for Doubtful Accounts general ledger account at December 31, 2016.