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.