Question: Rainy Day Company, a wholesaler, uses the
Rainy Day Company, a wholesaler, uses the aging method to estimate bad debt losses. The following schedule of aged accounts receivable was prepared at December 31, 2013.
Age of Accounts _________________________________________Amount
0–30 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $478,600
31–60 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,300
61–90 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,200
91–120 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,300
Over 120 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,300
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $759,700
The following schedule shows the year-end receivables balances and uncollectible accounts experience for the previous five years.
The unadjusted Allowance for Bad Debts balance on December 31, 2013, is $25,124.
Instructions:
Compute the correct balance for the allowance account based on the average loss experience for the last five years and prepare the appropriate end-of-year adjusting entry.
Transcribed Image Text:
Year-End 0-30 31-60 61-90 91-120 Over Year Recelvables Days Days Days Days 120 Days 2012 $780,700 0.3% 0.9% 8.7% 52.1% 84.1% 2011 750,400 0.5 0.8 9.0 49.2 80.3 2010 681,400 0.4 1.1 9.5 53.7 82.0 2009 698,200 0.4 1.0 9.9 51.3 78.5 2008 723,600 0.2 1.1 8.9 49.9 85.2
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