Problem
Sultan Company has credit sales of $2.60 million for year 2016. On December 31, 2016, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $14,905. Sultan prepares a schedule of its December 31, 2016, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here.
|
December 31, 2011 Accounts Receivable
|
Age of Accounts Receivable
|
Expected Percent Uncollectible
|
|
$730,000
|
Not Yet Due
|
1.25%
|
|
354,000
|
1 to 30 days past due
|
2.00%
|
|
76,000
|
31 to 60 days past due
|
6.50%
|
|
48,000
|
61 to 90 days past due
|
32.75%
|
|
12,000
|
over 90 days past due
|
67.00%
|
Required:
Using the aging of accounts receivable method, find the estimate the required balance of the Allowance for Doubtful Accounts at December 31, 2016.
Prepare the adjusting entry to record bad debts.