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7 May, 22:58

Outlaw Bike Co. is a wholesaler of motorcycle supplies. An aging of the company's accounts receivable on December 31, and a historical analysis of the percentage of uncollectible accounts in each age category are as follows:

Age Class Balance Percent Uncollectible

Not past due $892,000 3/4 %

1-30 days past due 285,000 1

31-60 days past due 101,000 8

61-90 days past due 63,000 16

91-180 days past due 43,100 50

Over 180 days past due 17,700 80

Total $1,401,800

Required:

1. Assume that the allowance for doubtful accounts for Outiaw Bike Co. had a debit balance of $5,140 as of December 31. Journalize the adjusting entry for uncollectible accounts as of December 31 Dec. 31

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  1. 7 May, 23:16
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    The adjusting entry for uncollectible accounts as of December 31:

    Debit Bad debts expense $68,550

    Credit Allowance for doubtful accounts $68,550

    Explanation:

    Estimated uncollectible = $892,000 x 3/4% + $285,000 x 1% + $101,000 x 8% + $63,000 x 16% + $43,100 x 50% + $17,700 x 80% = $6,690 + $2,850 + $8,080 + $10,080 + $21,550 + $14,160 = $63,410

    The company uses aging of accounts receivable to estimate uncollectible. The allowance for doubtful accounts had a debit balance of $5,140 as of December 31.

    Bad debts expense = $63,410 + $5,140 = $68,550

    The adjusting entry for uncollectible accounts:

    Debit Bad debts expense $68,550

    Credit Allowance for doubtful accounts $68,550
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