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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 Total 0-30 31-60 61-90 91-120 Over 120 Accounts receivable $375,000 $220,000 $90,000 $40,000 $10,000 $15,000 % uncollectible 1% 4% 5% 8% 10% Calculate the total estimated bad debts based on the above information. Total Accounts receivable % uncollectible Estimated bad debts $375,000 0-30 $220,000 1% 31-60

Number of Days Outstanding 61-90 $90,000 $40,000 4% 5%

91-120 $10,000 8%

Over 120 $15,00 10%

$ $ $ $ $ $ Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible accounts receivable determined in previous question. Assume the current balance in Allowance for Doubtful Accounts is a $8,000 debit. Description/Account Debit Credit

Of the above accounts, $5,000 is determined to be specifically uncollectible. Prepare the journal entry to write off the uncollectible account. Description/Account Debit Credit

The company collects $5,000 subsequently on a specific account that had previously been determined to be uncollectible in previous question. Prepare the journal entry(ies) necessary to restore the account and record the cash collection. Description/Account Debit Credit

Accounts receivable 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?

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