To determine the adjusting entry for uncollectible accounts, we need to follow a series of steps.
First, we will find the total uncollectible accounts.
We have a schedule that gives us the amount for each aging category and the percentage that is expected to be uncollectible:
- Not Past Due: 371,300 at 2%
- 1-30 Days Past Due: 139,900 at 6%
- 31-60 Days Past Due: 61,600 at 25%
- 61-90 Days Past Due: 49,900 at 35%
- Over 90 Days Past Due: 49,400 at 50%
Here are the calculations:
1. Not Past Due: [tex]\( 371,300 \times 0.02 \)[/tex] = 7,426
2. 1-30 Days Past Due: [tex]\( 139,900 \times 0.06 \)[/tex] = 8,394
3. 31-60 Days Past Due: [tex]\( 61,600 \times 0.25 \)[/tex] = 15,400
4. 61-90 Days Past Due: [tex]\( 49,900 \times 0.35 \)[/tex] = 17,465
5. Over 90 Days Past Due: [tex]\( 49,400 \times 0.50 \)[/tex] = 24,700
Summing these, we get the total allowance for doubtful accounts:
[tex]\[
7,426 + 8,394 + 15,400 + 17,465 + 24,700 = 73,385
\][/tex]
Next, we need to consider the credit balance before adjustment, which is given as [tex]$15,410.
The uncollectible accounts expense is calculated by subtracting the credit balance before adjustment from the total allowance for doubtful accounts:
\[
73,385 - 15,410 = 57,975
\]
Therefore:
- The total uncollectible accounts (Allowance for Doubtful Accounts) is $[/tex]73,385.
- The uncollectible accounts expense needing adjustment is [tex]$57,975.
The required journal entry on July 31 to adjust for uncollectible accounts would be:
Journal Entry
Date: July 31
\begin{tabular}{|l|c|c|}
\hline
Account Title & Debit & Credit \\
\hline
Uncollectible Accounts Expense & 57,975 & \\
Allowance for Doubtful Accounts & & 57,975 \\
\hline
\end{tabular}
This journal entry increases the uncollectible accounts expense and adjusts the allowance for doubtful accounts by $[/tex]57,975 to appropriately reflect the expected uncollectible amounts based on the aging schedule.
