Dhaliwal Digital categorizes its accounts receivable into three age groups for purposes of estimating its allowance for uncollectible accounts. Accounts not yet due = $180,000; estimated uncollectible = 10%. Accounts 1-45 days past due = $25,000; estimated uncollectible = 20%. Accounts more than 45 days past due = $10,000; estimated uncollectible = 30%. Before recording any adjustments, Dhaliwal has a debit balance of $45,000 in its allowance for uncollectible accounts. Required: 1. Estimate the appropriate 12/31/2021 balance for Dhaliwal's allowance for uncollectible accounts. 2. What journal entry should Dhaliwal record to adjust its allowance for uncollectible accounts?

1.

Estimating the balance for allowance for uncollectible accounts on 12/31/2021 is $26,000

Explanation:

1.

Estimating the balance for allowance for uncollectible accounts on 12/31/2021:

Not yet due

Estimated amount uncollectible = Amount of Account Receivable * Estimate % uncollectible

= $180,000 * 10%

= $18,000

1 - 45 days

Estimated amount uncollectible = Amount of Account Receivable * Estimate % uncollectible

= $25,000 * 20%

= $5,000

Over 45 days

Estimated amount uncollectible = Amount of Account Receivable * Estimate % uncollectible

= $10,000 * 30%

= $3,000

Total estimated amount in Allowance for doubtful debt (Credit balance) = $18,000 + $5,000 + $3,000

= $26,000

2.

The journal entry for adjusting the allowance for uncollectible accounts is shown below:

December 31, 2021

Bad debt expense A/c ... Dr $71,000

Allowance for doubtful accounts A/c ... Cr $71,000

Working Note:

Bad debt expense for the present year = Total estimated amount in Allowance for doubtful debt (Credit balance) + Current balance in Allowance for doubtful debt (Debit balance)

= $26,000 + $45,000

= $71,000