Question

Warner Company's year-end unadjusted trial balance shows accounts receivable of $119,000, allowance for doubtful accounts of $800 (credit), and sales of $480,000. Uncollectibles are estimated to be 1.50% of accounts receivable. 1. Prepare the December 31 year-nd adjusting entry for uncollectibles. 2. What amount would have been used in the yearend adjusting entry if the allowance account had a yearend unadjusted debit balance of $1,300 ? Record the estimate of uncollectibles. Note: Enter debits before credits. What amount would have been used in the year-end adjusting entry if the allowance account had a year-end unadjusted debit balance of $1,300 ?

Answer 1

To calculate the year-end adjusting entry for uncollectibles, multiply the estimated uncollectibles rate with the accounts receivable balance. If the allowance account had a year-end unadjusted debit balance, subtract it from the calculated estimated uncollectibles.

Step-by-step explanation:

The December 31 year-end adjusting entry for uncollectibles can be calculated by multiplying the estimated uncollectibles rate with the accounts receivable balance. In this case, the estimated uncollectibles would be $119,000 x 1.50% = $1,785. Thus, the adjusting entry would be:

Debit: Uncollectible accounts expense - $1,785

Credit: Allowance for doubtful accounts - $1,785

If the allowance account had a year-end unadjusted debit balance of $1,300, we would subtract this debit balance from the calculated estimated uncollectibles. The adjusting entry would then be:

Debit: Uncollectible accounts expense - $485 ($1,785 - $1,300)

Credit: Allowance for doubtful accounts - $485 ($1,785 - $1,300)

Answer 2

To prepare the year-end adjusting entry for uncollectibles, calculate the estimated uncollectibles based on the percentage of accounts receivable. If the allowance account has a debit balance, subtract it from the estimated uncollectible to find the additional amount needed.

Step-by-step explanation:

1. To prepare the December 31 year-end adjusting entry for uncollectible, we need to calculate the estimated uncollectible first. We are told that uncollectibles are estimated to be 1.50% of accounts receivable. So, 1.50% of $119,000 is $1,785 (0.015 * $119,000). The adjusting entry would be to debit the allowance for doubtful accounts for $1,785 and credit the uncollectible accounts expense for the same amount.

2. If the allowance account had a year-end unadjusted debit balance of $1,300, we need to adjust for the estimated uncollectibles. The estimate for uncollectible is still 1.50% of accounts receivable. So, 1.50% of $119,000 is $1,785. Since the allowance account already has a debit balance of $1,300, we subtract $1,300 from $1,785 to find the additional amount needed. The additional amount for the adjusting entry would be $485 ( $1,785 - $1,300). The adjusting entry would be to debit the allowance for doubtful accounts for $485 and credit the uncollectible accounts expense for the same amount.