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Homework answers / question archive / Drew Incorporated provides legal services

Drew Incorporated provides legal services

Accounting

Drew Incorporated provides legal services. During 2021, the company provides services of $500,000 on account. Of this amount, $70,000 remains uncollected at the end of the year. An aging schedule as of December 31, 2021, is provided below.

 

Age Group

Amount Receivable

Estimated Percent Uncollectible

Not yet due

$40,000

5%

0-30 days past due

19,000

10%

31-60 days past due

9,000

20%

More than 60 days past due

   6,000

40%

Total

$74,000

 

 

Required:

 

  1. Calculate the allowance for uncollectible accounts.
  2. Record the December 31, 2021 adjustment, assuming the balance of Allowance for Uncollectible Accounts before adjustment is $500 (debit).

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1) Computation of Allowance for Uncollectible Accounts:            
      Amount Estimated Estimated  
      Receivable Percent Bad  
Age Group       Uncollectible Debts  
             
Not yet due     40,000 5% 2000  
0-30 days past due   19,000 10% 1900  
31-60 days past due   9,000 20% 1800  
More than 60 days past due 6,000 40% 2400  
Total     74,000   8100  
             
2) Journal Entry:            
Date General Journal     Debit Credit
             
December 31, 2012 Bad Debt Expenses     8600  
  Allowance for Uncollectible Accounts   8,600
  (8100+500)        

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