Reference no: EM133031846
Question - Straight, a Broadway media firm, uses the balance sheet approach to estimate uncollectible accounts expense. At year-end managing of the accounts receivable produced the following five groupings:
a) Not yet due $500,000
b) 1-30 days past due 110,000
c) 31-60 days past due 50,000
d) 61-90 days past due 30,000
e) Over 90 days past due 60,000
Total $750,000
On the basis of past experience, the company estimated the percentages probably uncollectible for the above five age groups to be as follows:
Group-A 1%, Group-B 3%, Group-C 10%; Group-D 20% and Group-E 50%.
The Allowance for Doubtful Accounts before adjustments at December 31 showed a credit balance of $4,700.
Required -
(a) Compute the estimated amount of uncollectible accounts based on the above classification by age groups.
(b) Prepare the adjusting entry needed to bring the Allowance for Doubtful Accounts to the proper amount.