During 2003, Wishbone Corporation had a total of $5,000,000 in sales, of which 80% were on credit. At year end, the Accounts Receivable balance showed a total of $2,300,000, which had been aged as follows:
|
Age |
Amount |
|
Current |
1,900,000 |
|
1 30 days past due |
200,000 |
|
31 60 days past due . |
100,000 |
|
61 90 days past due . |
70,000 |
|
Over 90 days past due. |
$30,000 |
|
$2,300,000 |
Required
Prepare the journal entry required at year end to record the bad debt expense under each of the following independent conditions. Assume, where applicable, that Allowance for Bad Debts had a credit balance of $5,500 immediately before these adjustments.
1. Use the direct write off method. (Assume that $60,000 of accounts are determined to be uncollectible and are written off in a single year end entry.)
2. Based on experience, uncollectible accounts existing at year end are estimated to be 3% of total accounts receivable.
3. Based on experience, uncollectible accounts are estimated to be the sum of:
1% of current accounts receivable
6% of accounts 1 30 days past due
10% of accounts 31 60 days past due
20% of accounts 61 90 days past due
30% of accounts over 90 days past due