Answered

Guinevere Company has the following data extracted from its Accounts Receivable records at June 30, 2011

Customer Balance Current 31 -75 days Over 75 days
A $ 8,000 $ 5,000 $ 2,000 $ 1,000
B $ 2,000 - $ 2,000 -
C $ 4,000 $ 4,000 - -
D $ 9,000 $ 2,000 $ 1,000 $ 6,000
E $ 3,000 $ 2,000 - $ 1,000
F $ 6,000 $ 6,000 - -
G $ 7,000 $ 3,000 $ 3,000 $ 1,000
Totals $ 39,000 $ 22,000 $ 8,000 $ 9,000
Guinevere's sales terms are 1/15 n/30 and it records sales at the gross amount of the invoice.
Guinevere's year end is June 30
The unadjusted balance in the Allowance for Doubtful Accounts at June 30 is $8,000 dr.
Guinevere makes average sales of $2,000,000 per year and averages write offs of uncollectible balances of $100,000 per year.
Sales for the year ended June 30, 2010 are $1,400,000 credit sales and $400,000 cash sales
Guinevere has a very conservative receivables management strategy.
No adjusting entries have been recorded at June 30
If Guinevere used the Allowance Method (aging) to estimate bad debts and by a detailed review of the above aged trial balance decided that an allowance of $30,000 was appropriate, then the adjusting entry on June 30 would involve a credit to the "Allowance for Uncollectible Accounts" of:

Multiple Choice
$38,000
$30,000
Some other amount
$8,000
$90,000



Answer :

fishlord677
To determine the adjusting entry for the Allowance for Doubtful Accounts using the aging method, we need to calculate the required adjustment based on the given information:

1. **Current Allowance Balance (unadjusted)**: $8,000 (given)
2. **Desired Allowance Amount**: $30,000 (based on detailed review)

To find the required adjustment:

\[ \text{Adjustment Required} = \text{Desired Allowance} - \text{Current Allowance Balance} \]
\[ \text{Adjustment Required} = $30,000 - $8,000 \]
\[ \text{Adjustment Required} = $22,000 \]

Therefore, the adjusting entry on June 30 would involve a credit to the "Allowance for Uncollectible Accounts" of **$22,000**. This amount reflects the increase needed in the allowance to meet the desired amount of $30,000, considering the unadjusted balance of $8,000 already in place.