P9-4A Wall Inc. uses the allowance method to estimate uncollectible accounts receivable.The

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P9-4A Wall Inc. uses the allowance method to estimate uncollectible accounts receivable.The

company produced the following aging of the accounts receivable at year end.

Number of Days Outstanding

0–30 31–60 91–120 Over 120

Accounts receivable

% uncollectible

Estimated bad debts

61–90

$375,000 $220,000 $90,000 $10,000 $15,000

8% 10%

$40,000

1% 4% 5%

Instructions

(a) Calculate the total estimated bad debts based on the above information.

(b) Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible

accounts receivable determined in (a). Assume the current balance in Allowance for

Doubtful Accounts is an $8,000 debit.

(c) Of the above accounts, $5,000 is determined to be specifically uncollectible. Prepare the journal

entry to write off the uncollectible account.

(d) The company collects $5,000 subsequently on a specific account that had previously been

determined to be uncollectible in (c). Prepare the journal entry(ies) necessary to restore the

account and record the cash collection.

(e) Comment on how your answers to (a)–(d) would change if Wall Inc. used 3% of

total accounts receivable, rather than aging the accounts receivable.What are the advantages

to the company of aging the accounts receivable rather than applying a percentage to total

accounts receivable?