Carmack Company has credit sales of $2.60 million for year 2011. On December 31, 2011, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of $15,566. Carmack prepares a schedule of its December 31, 2011, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here. December 31, 2011 Accounts Receivable Age of Accounts Receivable Expected Percent Uncollectible $ 520,000 Not yet due 0.80 % 208,000 1 to 30 days past due 1.55 41,600 31 to 60 days past due 6.05 20,800 61 to 90 days past due 30.50 4,160 Over 90 days past due 63.00

Carmack Company has credit sales of $2.60 million for year 2011. On December 31, 2011, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of $15,566. Carmack prepares a schedule of its December 31, 2011, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here.

December 31, 2011 Accounts Receivable		Age of Accounts Receivable	Expected Percent Uncollectible
$	520,000	Not yet due	0.80	%
	208,000	1 to 30 days past due	1.55
	41,600	31 to 60 days past due	6.05
	20,800	61 to 90 days past due	30.50
	4,160	Over 90 days past due	63.00

Required:
1.	Complete the below table to estimate the required balance of Allowance for Doubtful Accounts at December 31, 2011, using the aging of accounts receivable method.

Explanation:

Calculation of the estimated balance of the allowance for uncollectibles

Not due:	$	520,000 × 0.0080	=	$	4,160
1 to 30:		208,000 × 0.0155	=		3,224
31 to 60:		41,600 × 0.0605	=		2,517
61 to 90:		20,800 × 0.3050	=		6,344
Over 90:		4,160 × 0.6300	=		2,621
				$	18,866	Credit

2.

Prepare the adjusting entry to record bad debts expense at December 31, 2011.

 

Explanation:

Unadjusted balance	$	15,566	credit
Estimated balance		18,866	credit
Required adjustment	$	3,300	credit