Tarpon Inc. made $1,000,000 in sales during 2016. Thirty per cent of these were cash sales. During the year, $25,000 of accounts receivable were written off as being uncollectible. In addition, $15,000 of the accounts that were written off in 2015 were unexpectedly collected. At its year-end, December 31, 2016, Tarpon had $250,000 of accounts receivable. The balance in the Allowance for Doubtful Accounts general ledger account was $15,000 credit at December 31, 2015.
Required:
- Prepare journal entries to record the following 2016 transactions:
- The write-off of $25,000
- The recovery of $15,000.
- Recalculate the balance in the Allowance for Doubtful Accounts general ledger account at December 31, 2016.
- Prepare the adjusting entry required at December 31, 2016 for each of the following scenarios:
- The estimated uncollectible accounts at December 31, 2016 is three per cent of credit sales.
- The estimated uncollectible accounts at December 31, 2016 is estimated at five per cent of accounts receivable.
- The estimated uncollectible accounts at December 31, 2016 are calculated as follows:
|
Age (days) |
Estimated loss percentage |
|
1-30 |
2% |
|
31-60 |
4% |
|
61-90 |
5% |
|
91-120 |
10% |
|
Over 120 |
50% |
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