1. Timken Inc. made $900,000 in sales during 2016. Twenty-five percent of these were cash sales. During the year, $22,500 of accounts receivable were written off as being uncollectible. In addition, $13,500 of the accounts that were written off in 2015 were unexpectedly collected. At its' year-end December 31, 2016, Timken had $225,000 of accounts receivable. The balance in the Allowance for Doubtful Accounts general ledger account was $13,500 credit at December 31, 2015.
|
Age (days)
|
Accounts
Receivable
|
|
1-30
|
$ 90,000
|
|
31-60
|
45,000
|
|
61-90
|
22,500
|
|
91-120
|
54,000
|
|
Over 120
|
13,500
|
|
Total
|
$225,000
|
Required:
Prepare journal entries to record the following 2016 transactions:
The write-off of $22,500
The recovery of $13,500
Recalculate the balance in the Allowance for Doubtful Accounts general ledger account at December 31, 2016.
The estimated uncollectible accounts at December 31, 2016 are calculated as follows:
|
Age (days)
|
Estimated
Loss
percentage
|
|
1-30
|
1.5%
|
|
31-60
|
3%
|
|
61-90
|
4%
|
|
91-120
|
9%
|
|
Over 120
|
45%
|
Required: Prepare the adjusting entry required at December 31, 2016.