ACC 01 Week 11 - Chapter 9 --- P9-3, P9-4, P9-5

PROBLEM 9-4

Diamond Company has credit sales of $2.0 million dollars. On December 31, 2008, the company’s Allowance for Doubtful Accounts has an unadjusted debit balance of . Newcomer prepares a schedule of its December 31, 2008, accounts receivable by age. On the basis of past experience, it also estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here:

Not due yet 1 to 30 days past due 31 to 60 days past due 61 to 90 days past due Over 90 days past due

Required

1.  Estimate the amount needed in the Allowance for Doubtful Accounts at December 31, 2008, using the aging of accounts receivable method.

2.  Prepare the journal entry to record bad debts expense at December 31, 2008.

Check dr. Bad Debt Expense 6,175$

7.50% 2.50% 1.25%

2,100$

82.50% 30.00%

14,000 7,000 4,000

Expected Percent Uncollectible

2,000

Age of Accounts Receivable

December 31, 2008 Accounts Receivable

28,000$