Leland Hotels has accounts receivable of $98,100 at March 31. An analysis of the accounts shows the following:
|
Month of Sale |
Balance, March 31 |
|
March |
$65,000 |
|
February |
17,600 |
|
January |
8,500 |
|
Prior to January |
7,000 |
|
|
$98,100 |
Credit terms are 2/10, n/30. On March 31, Allowance for Doubtful Accounts has a credit balance of $1,200 prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company’s estimate of bad debts is as follows:
|
Age of Accounts |
Estimated Percentage Uncollectible |
|
1–30 days |
2.0% |
|
30–60 days |
5.0% |
|
60–90 days |
30.0% |
|
Over 90 days |
50.0% |
Instructions
(a) Determine the total estimated uncollectible.
(b) Prepare the adjusting entry at March 31 to record bad debts expense.