Questions: Requirement 1. Journalize the year-end adjusting entry for bad debts on the basis of the aging schedule. Show the T-account for the Allowance for Bad Debts at December 31, 2025. Begin by determining the target balance of Allowance for Bad Debts by using the age of each account. Age of Accounts 1-30 Days 31-60 Days 61-90 Days Over 90 Days Total Balance Accounts Receivable 80,000 45,000 25,000 5,000 Estimated percent uncollectible 0.9% 3.0% 8.0% 46.0% Estimated total uncollectible Journalize the year-end adjusting entry for bad debts on the basis of the aging schedule. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Date Accounts and Explanation Credit Dec. 31 Show the T-account for the Allowance for Bad Debts at December 31, 2025.

Requirement 1. Journalize the year-end adjusting entry for bad debts on the basis of the aging schedule. Show the T-account for the Allowance for Bad Debts at December 31, 2025. Begin by determining the target balance of Allowance for Bad Debts by using the age of each account. Age of Accounts 1-30 Days 31-60 Days 61-90 Days Over 90 Days Total Balance Accounts Receivable 80,000 45,000 25,000 5,000 Estimated percent uncollectible 0.9% 3.0% 8.0% 46.0% Estimated total uncollectible Journalize the year-end adjusting entry for bad debts on the basis of the aging schedule. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Date Accounts and Explanation Credit Dec. 31 Show the T-account for the Allowance for Bad Debts at December 31, 2025.
Transcript text: Requirement 1. Journalize the year-end adjusting entry for bad debts on the basis of the aging schedule. Show the T-account for the Allowance for Bad Debts at December 31, 2025. Begin by determining the target balance of Allowance for Bad Debts by using the age of each account. \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|} \hline \multirow[t]{3}{*}{} & \multicolumn{9}{|c|}{Age of Accounts} \\ \hline & \multicolumn{2}{|r|}{\multirow[t]{2}{*}{\begin{tabular}{l} 1-30 \\ Days \end{tabular}}} & \multicolumn{2}{|r|}{\multirow[t]{2}{*}{\begin{tabular}{l} 31-60 \\ Days \end{tabular}}} & \multicolumn{2}{|r|}{\multirow[t]{2}{*}{\begin{tabular}{l} \[ 61-90 \] \\ Days \end{tabular}}} & \multicolumn{2}{|r|}{\multirow[t]{2}{*}{\begin{tabular}{l} Over 90 \\ Days \end{tabular}}} & \multirow[t]{3}{*}{\begin{tabular}{l} Total \\ Balance \end{tabular}} \\ \hline & & & & & & & & & \\ \hline Accounts Receivable & \$ & 80,000 & \$ & 45,000 & \$ & 25,000 & \$ & 5,000 & \\ \hline Estimated percent uncollectible & & 0.9 \% & & 3.0 & & 8.0\% & & 46.0 & \\ \hline Estimated total uncollectible & & & & & & & & & \\ \hline \end{tabular} Journalize the year-end adjusting entry for bad debts on the basis of the aging schedule. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) \begin{tabular}{|c|c|c|} \hline Date & Accounts and Explanation & Credit \\ \hline \multirow[t]{6}{*}{Dec. 31} & & \\ \hline & $\square$ & \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline & || & \\ \hline \end{tabular} Show the T-account for the Allowance for Bad Debts at December 31, 2025.
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Solution

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To address the question, we need to follow these steps:

  1. Calculate the estimated total uncollectible amount for each age category of accounts receivable.
  2. Determine the target balance for the Allowance for Bad Debts account.
  3. Journalize the year-end adjusting entry for bad debts.
  4. Show the T-account for the Allowance for Bad Debts at December 31, 2025.
Step 1: Calculate the Estimated Total Uncollectible Amount

Using the given percentages for each age category, we calculate the estimated uncollectible amounts:

  • 1-30 Days: \[ \$80,000 \times 0.9\% = \$720 \]

  • 31-60 Days: \[ \$45,000 \times 3.0\% = \$1,350 \]

  • 61-90 Days: \[ \$25,000 \times 8.0\% = \$2,000 \]

  • Over 90 Days: \[ \$5,000 \times 46.0\% = \$2,300 \]

Step 2: Determine the Target Balance for the Allowance for Bad Debts

Sum the estimated uncollectible amounts to find the target balance: \[ \$720 + \$1,350 + \$2,000 + \$2,300 = \$6,370 \]

Step 3: Journalize the Year-End Adjusting Entry for Bad Debts

Assuming the Allowance for Bad Debts account has a current balance (let's assume it is a credit balance of \$1,000 for this example), the adjusting entry will be the difference needed to reach the target balance of \$6,370.

\[ \text{Required adjustment} = \$6,370 - \$1,000 = \$5,370 \]

The journal entry will be:

\begin{tabular}{|c|c|c|} \hline Date & Accounts and Explanation & Credit \\ \hline \multirow[t]{6}{*}{Dec. 31} & Bad Debt Expense & \$5,370 \\ \hline & Allowance for Bad Debts & \$5,370 \\ \hline & & \\ \hline & & \\ \hline & & \\ \hline & (To record the year-end adjustment for bad debts) & \\ \hline \end{tabular}

Step 4: Show the T-Account for the Allowance for Bad Debts at December 31, 2025

\[ \begin{array}{c|c|c} \text{Allowance for Bad Debts} & \text{Debit} & \text{Credit} \\ \hline \text{Balance (before adjustment)} & & \$1,000 \\ \text{Adjustment} & & \$5,370 \\ \hline \text{Balance (after adjustment)} & & \$6,370 \\ \end{array} \]

Summary
  1. The estimated total uncollectible amount is \$6,370.
  2. The adjusting journal entry is: \[ \begin{array}{|c|c|c|} \hline \text{Date} & \text{Accounts and Explanation} & \text{Credit} \\ \hline \text{Dec. 31} & \text{Bad Debt Expense} & \$5,370 \\ \hline & \text{Allowance for Bad Debts} & \$5,370 \\ \hline & \text{(To record the year-end adjustment for bad debts)} & \\ \hline \end{array} \]
  3. The T-account for the Allowance for Bad Debts at December 31, 2025, shows a balance of \$6,370.
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