Reference no: EM133172325

Question - Innovations Corp (IC) uses the percentage of credit sales method to estimate bad debts each month and then uses the aging method at year-end. During November 2020, IC sold services on account for $106,000 and estimated that 1/2 of one percent of those sales would be uncollectible. At its December 31 year-end, total Accounts Receivable is $99,000, aged as follows:

(1) 1 to 30 days old, $80,000;

(2) 31 to 90 days old, $13,500; and

(3) more than 90 days old, $5,500.

Experience has shown that for each age group, the average rate of uncollectibility is (1) 1 percent, (2) 15 percent, and (3) 40 percent, respectively. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $2,200 credit balance at December 31, 2020.

Required - Prepare the November 2020 adjusting entry for bad debts.