_________ Companys account receivable subsidiary ledge shows the following

information:
Customer

Balance, Dec. 31, 2014

80,000

65,000

55,000

77,000

58,000

Invoice Date

Amount

12-14-14

45,000

11-26-14

50,000

12-1-14

34,000

9-4-14

40,000

10-10-14

65,000

11-23-14

60,000

12-16-14

30,000

11-29-14

45,000

10-24-14

20,000

1. Payments made are applied first to the earliest accounts.

2. Payments made by Customer A totaled to 20,000 with a proof of
collection receipt showing 20,000 payment was really made. Upon
investigation, only 15,000 was reported by the cashier as collection
made.

3. At the end of the year, Customer Bs account worth 3,000 for the
account dating September 4 is deemed uncollectible.
4. Customer C paid 10,000 for his account and issued a 120-day 10% Notes
Receivable for his remaining account worth 10,000, no entries were
made for the transaction for the receipt of Notes.
5. Customer D, on the confirmation letter responded that his account is
understated by 3,000. Details shows that Customer D made an advance
payment worth 5,000. The officer credited the proceeds amount to Ds
account. On the later date, sales worth 30,000, including 2,000 from the
advances, was made.
6. A shipment was still in transit as of December 31. The term was FOB
Shipping point, the shipment was a credit sale to Customer E worth
10,000. No entry were made for the sale.
7. Aside from the findings above mentioned, all other transactions made for
the accounts were payments made by the customers.

8. There were no provisions yet made by the company. Companys

beginning balance shows 12,880 credit balance to allowance for bad
debts. The estimated bad debts rates of the following are based on
Companys collection experience; 0-30 days 1% uncollectable, 31-60
days 95% collectable, 61-90 days 10% uncollectable, 90 and above 20%
uncollectable.
REQUIREMENT: Prepare necessary Adjusting entries and aging of
accounts receivable.

Solution:
Proposed Adjusting Entries

Receivable from
employee - Cashier

5,000
Accounts Receivable - A

Allowance for Bad

Debts

5,000
3,000

Accounts Receivable - B
Notes Receivable C

3,000
10,000

Accounts Receivable - C
Accounts Receivable D

10,000
3,000

Advances from
Customer - D
Accounts Receivable
E

3,000

10,000
Sales

Bad Debts Expense

10,000
8,500

Allowance for Bad

8,500

Debts

Aging of Receivables
Age Classification
Balance

0-30 days

31-60 days

75,000

25,000

50,000

65,000

28,000

45,000

80,000

30,000

50,000

68,000

10,000

45,000

13,000

Total

333,000

93,000

145,000

58,000

37,000

1%

5%

10%

20%

930

7,250

5,800

7,400

Provision
rate
Required
Allowance

21,380

61-90 days

90 days
above

Customer

37,000
45,000