Question

E8-2A

Credit Losses Based on Accounts Receivable Hunter, Inc. analyzed its accounts receivable balances at Dec. 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectable:

The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $820 on December 31, before any adjustments.

a. Prepare the adjusting entry for estimated credit losses on December 31.

b. Prepare the journal entry to write off the Rose Company's account on April 10 of the following year in the amount of $625.

Age Group

Balance

Probability of Noncollection

0-30 days past due

$90,000

1

31-60 days past due

20,000

2

61-120 days past due

11,000

6

121-180 days past due

6,000

10

Over 180 days past due

5,000

25

 

$132,000