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The accounts of Long Company provided the following 20X5 information at 31 December 20X5 (end of the annual period):

Accounts receivable balance, 1 January 20x5 $ 60,000

Allowance for doubtful accounts balance, 1 January 20x5 4,800

Uncollectible account to be written off during 20X5 (ex-customer sl0) 1,900

Cash collected on accounts receivable during 20x5 179,000


Estimates for bad debt losses:

a. Based on ending balance of accounts receivable, 8%.

b. Based on aging schedule (excludes Slo's account):

Age Accounts Receivable Probability of Noncollection

Less than 30 days $31.000 2%

31-90 days 10.600 10

91-120 days 6.600 30

More than 120 days 5,600 60

Required: 1. Give the entry to write off customer Slo's long-overdue account. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer :

Journal entry: Debit: Allowance for Doubtful Accounts - $58,100; Credit: Accounts Receivable - $58,100.

To write off customer Slo's long-overdue account, we need to update the Accounts Receivable and Allowance for Doubtful Accounts (AFDA) balances.

First, let's calculate the total balance of Slo's account at the end of 20X5. We start with the opening balance of $60,000 and subtract the uncollectible amount of $1,900, giving us $58,100.

Next, we need to adjust the AFDA balance. The AFDA is estimated based on the ending balance of accounts receivable, which is $31,000. We multiply this by the estimated bad debt loss rate of 8% to get $2,480.

Now, we can update the AFDA balance. We start with the opening balance of $4,800 and add the estimated bad debt loss of $2,480, giving us a new AFDA balance of $7,280.

Finally, we can write off Slo's account. We debit AFDA for $58,100 (Slo's account balance) and credit Accounts Receivable for the same amount. This reduces the accounts receivable balance and reflects the write-off of Slo's account.

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