Business, 08.04.2020 00:13 nireegnu

Innovative Tech Inc. (ITI) has been using the percentage of credit sales method to estimate bad debts. During November, ITI sold services on account for $160,000 and estimated that 3/4 of 1 percent of those sales would be uncollectible.

Required:

Prepare the November adjusting entry for bad debts.

Starting in December, ITI switched to using the aging method. At its December 31 year-end, total Accounts Receivable is $80,000, aged as follows: (1) 1–30 days old, $65,000; (2) 31–90 days old, $12,000; and (3) more than 90 days old, $3,000. The average rate of uncollectibility for each age group is estimated to be (1) 12 percent, (2) 24 percent, and (3) 48 percent, respectively. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts.

Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $1,100 credit balance at December 31. Prepare the December 31 adjusting entry.

Show how the various accounts related to accounts receivable should be shown on the December 31 balance sheet.

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