Reference no: EM13256964
From inception of operations to Dec 31,2007,, Blaise PascalCorporation provided for uncollectible accounts receivable underteh allowance method: provisions were made monthy at 2% of creditsales; bad debts written off were charged to allowance account;recoveries of bad debts previously written off were credited to tehallowance account; and no year-end adjustments to the allowanceaccount were made. Pascal's usual credit terms are ntet 30days. the balance in the Allowance for Doubtful accounts was$154,000 at Jan 1, 2007. During 2007 credit sales totaled$9,000,000, interim provisions for doubtful accounts were made at2% of credit sales, $95,000 of bad debts were written off, andrecoveries of accounts previously written off amounted to preparedfor the first time as of Dec 31, 2007. A summary of the agingis as follows:
classification by month of sale bal in eacategory est % of uncollectible
----------------------------- ------------------- ----------------------
Nov-Dec2007 $1,080,000 2%
July-Oct 650,000 10%
Jan-June 420,000 25%
Prior to1/1/07 150,000 70%
Based on the review of collectibility of teh account balancesin the "prior to 1/1/07" aging category, additional receivablestotaling $60,000 were written off as of Dec 31,2007. the 70%uncollectible estimate applies to the remaining $90,000 in thecategory. Effective with the year ended Dec 31,2007, Pascaladopted a new accounting method for estimating the allowance fordoubtful accounts at teh amount indicated by the year-end aginganalysis of accounts receivable. Instructions: a) Prepare a schedule analyzing the changes in the Allowancefor Doubtful Accounts for the year ended Dec 31,2007. Showsupporting computations in good form (hint:in computing the12/31/07 allowance, subtract the $60,000 write-off) b) Prepare teh journal entry for the year-end adjustetn to theAllowance for Doubtful Accounts balance as of Dec 31,2007
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