On December 31, 2011, Colonial Corporation had the following account balances related to credit sales and receivables prior to recording adjusting entries:

Accounts receivable: $25,000 debit balance
Allowance for doubtful accounts: $200 credit balance
Sales revenue (all sales on credit): $4

Present the necessary year-end adjusting entry related to uncollectible accounts for each of the following independent assumptions:A. An aging of accounts receivable is completed. It is estimated that $2,150 of the receivables outstanding at year-end will be uncollectible. B. It is estimated that 1% of credit sales for the year will prove to be uncollectible.
C. Assume the same information presented above except that prior to adjustment, the Allowance for Doubtful Accounts had a debit balance of $200 rather than a credit balance of $200.

Answer

Colonial corporation

Journal entries

A. $2,150 uncollectible of the year end Accounts receivable balance.

Debit Uncollectible Account with $2,150

Credit Account Receivable Account with $2,150

(Being aged debt that is uncollectible at year end)

Debit Allowance for doubtful debt with $200

Credit Uncollectible debt Account with $200

(Being reversal of allowance for doubtful debt no longer required after ageing review of debt)

B. 1% of credit sales is uncollectible

1% of $400,000 = $4,000

Debit Uncollectible Account with $4,000

Credit Account Receivable Account with $4,000

(Being 1% of credit sales that is uncollectible at year end)

Debit Allowance for doubtful debt with $200

Credit Uncollectible debt Account with $200

(Being reversal of allowance for doubtful debt no longer required after ageing review of debt)

C. (assuming a above but allowance for doubtful debt is a debit balance of $200)

i. $2,150 uncollectible of the year end Accounts receivable balance.

Debit Uncollectible Account with $2,150

Credit Account Receivable Account with $2,150

(Being aged debt that is uncollectible at year end)

ii. 1% of credit sales is uncollectible

1% of $400,000 = $4,000

Debit Uncollectible Account with $4,000

Credit Account Receivable Account with $4,000

(Being 1% of credit sales that is uncollectible at year end)

The debit receivable balance could relate to debts once written off but now being paid.

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23

after cutting wages and benefits in order to increase profit .

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