| Innovative Tech Inc. (ITI) uses the percentage of credit sales method to estimate bad debts each month and then uses the aging method at year-end. During November, ITI sold services on account for $160,000 and estimated that 3/4 of one percent of those sales would be uncollectible. At its December 31 year-end, total Accounts Receivable is $80,000, aged as follows: (1) 130 days old, $65,000; (2) 3190 days old, $12,000; and (3) more than 90 days old, $3,000. Experience has shown that for each age group, the average rate of uncollectibility is (1) 12 percent, (2) 24 percent, and (3) 48 percent, respectively. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $1,100 credit balance at December 31. | 1a. Prepare the November adjusting entry for bad debts | 1b. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts. | | | | | | 130 | 3190 | > 90 | Total | | Accounts Receivable | | | | $0 | | Estimated Uncollectible (%) | | | | | | Estimated Uncollectible ($) | | | | $0 | | | 1c. Prepare the December 31 adjusting entry. -Record the adjusting entry for bad debts as of Dec. 31 1d. Show how the various accounts related to accounts receivable should be shown on the December 31 balance sheet. | | | | | |
