Financial Accounting: An Integrated Statements Approach, 2nd Edition

$510. The amount to be added to this balance is therefore $2,880 ($3,390 $510), and

the adjusting entry is as follows:

Aug. 31 Bad Debt Expense 2,880

Allowance for Doubtful Accounts 2,880

After the preceding adjusting entry is posted to the ledger, Bad Debt Expense will

have a balance of $2,880, and the Allowance for Doubtful Accounts will have a balance

of $3,390, as shown below.

362 Chapter 8 Receivables

Exhibit 2

Estimate of Uncollectible

Accounts

Estimated

Uncollectible Accounts

Age Interval Balance Percent Amount

Not past due $75,000 2% $1,500

1–30 days past due 4,000 5 200

31–60 days past due 3,100 10 310

61–90 days past due 1,900 20 380

91–180 days past due 1,200 30 360

181–365 days past due 800 50 400

Over 365 days past due 300 80 240

Total $86,300 $3,390

BAD DEBT EXPENSE

Aug. 31 Adjusting entry 2,880

Aug. 31 Adjusted balance 2,880

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Aug. 31 Unadusted balance 510

Aug. 31 Adjusting entry 2,880

Aug. 31 Adjusted balance 3,390

As shown above, after the adjustment is recorded, the balance of the bad debt ex-

pense account is $2,880, and the balance of the allowance account is $3,390. The net re-

alizable value of the receivables is $82,910 ($86,300 $3,390).

Ashby& Co.

B. T. Barr

Brock Co.

Customer Balance

$ 150

610

470

Not

Past

Due

Days Past Due

1–30 31–60 61–90 91–180181–365

over

365

$ 470

$ 150

$ 350 $260

Saxon Woods

Co.

Saxon Woods

Co. 160

TotTotaall $86,300 $75,000 $4,000 $3,100 $1,900 $1,200 $800 $300

160

Exhibit 1

Aging of Accounts

Receivable

SCF BS IS

—ATSET Ec