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(Solution Download) Putnam & Putnam, a legal firm, uses the balance sheet approach to estimate uncollectible account


 

 

 

 

 

 

 

Putnam & Putnam, a legal firm, uses the balance sheet

 

approach to estimate uncollectible accounts expense. At year-end,

 

an aging of the accounts receivable produced the following five

 

groupings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

a.

Not yet due$250,000

 

b.

1Ac??o30 days past due105,000

 

c.

31Ac??o60 days past due40,000

 

d.

61Ac??o90 days past due7,500

 

e.

Over 90 days past due15,000

 

Total$417,500

 

 

 

 

 

 

 

 

 

On the basis of past experience, the company estimated the

 

percentages probably uncollectible for the above five age groups to

 

be as follows: Group a, 1 percent; Group b, 3 percent; Group c, 10

 

percent; Group d, 20 percent; and Group e, 50 percent.

 

 

 

 

 

 

 

 

 

     The Allowance for Doubtful

 

Accounts before adjustment at December 31 showed a credit balance

 

of $5,900.

 

 

 

 

 

 

 

 

 

a.

 

Compute the estimated amount of uncollectible accounts based on

 

the above classification by age groups.

 

 

 

 

 

 

 

 

 

b.

 

Prepare the adjusting entry needed to bring the Allowance for

 

Doubtful Accounts to the proper amount

 

 

 

 

 

 

 

 

 

c.

 

Assume that on January 10 of the following year, Putnam &

 

Putnam learned that an account receivable that had originated on

 

September 1 in the amount of $4,300 was worthless because of the

 

bankruptcy of the client, Safeland Co. Prepare the journal entry

 

required on January 10 to write off this account.

 

 


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