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QuestionEstimate uncollectible receivables for a Physical Therapy Center, record the adjustment, and calculate net accounts receivable.

Studdy Solution

STEP 1

Assumptions1. The total accounts receivable is 92,000.Theallowanceforuncollectibleaccountsis92,000. The allowance for uncollectible accounts is ,200 (debit)
3. The estimated percent uncollectible for each age group is as follows - Not yet due5% -0 to60 days past due10% -61 to120 days past due20% - More than120 days past due70%
4. The amount receivable for each age group is as follows - Not yet due 42,000−0to60dayspastdue42,000 -0 to60 days past due 24,200 -61 to120 days past due 14,200−Morethan120dayspastdue14,200 - More than120 days past due 11,600

STEP 2

First, we need to estimate the amount of uncollectible receivables for each age group. We can do this by multiplying the amount receivable by the estimated percent uncollectible.
Uncollectible receivables=Amount receivabletimesEstimated percent uncollectibleUncollectible\, receivables = Amount\, receivable \\times Estimated\, percent\, uncollectible

STEP 3

Now, plug in the given values for the amount receivable and estimated percent uncollectible to calculate the uncollectible receivables for each age group.
For the "Not yet due" groupUncollectible receivables=$42,000times5%Uncollectible\, receivables = \$42,000 \\times5\%

STEP 4

Convert the percentage to a decimal value.
%=0.05\% =0.05Uncollectible receivables=$42,000times0.05Uncollectible\, receivables = \$42,000 \\times0.05

STEP 5

Calculate the uncollectible receivables for the "Not yet due" group.
Uncollectible receivables=$42,000times0.05=$2,100Uncollectible\, receivables = \$42,000 \\times0.05 = \$2,100

STEP 6

Repeat steps3 to5 for the other age groups.
For the "0 to60 days past due" groupUncollectible receivables=$24,200times10%=$2,420Uncollectible\, receivables = \$24,200 \\times10\% = \$2,420For the "61 to120 days past due" groupUncollectible receivables=$14,200times20%=$2,840Uncollectible\, receivables = \$14,200 \\times20\% = \$2,840For the "More than120 days past due" groupUncollectible receivables=$11,600times70%=$8,120Uncollectible\, receivables = \$11,600 \\times70\% = \$8,120

STEP 7

Now that we have the uncollectible receivables for each age group, we can sum these up to find the total uncollectible receivables.
Total uncollectible receivables=∑Uncollectible receivablesTotal\, uncollectible\, receivables = \sum Uncollectible\, receivables

STEP 8

Plug in the values for the uncollectible receivables to calculate the total uncollectible receivables.
Total uncollectible receivables=$2,100+$2,420+$2,840+$8,120Total\, uncollectible\, receivables = \$2,100 + \$2,420 + \$2,840 + \$8,120

STEP 9

Calculate the total uncollectible receivables.
Total uncollectible receivables=$2,100+$2,420+$2,840+$8,120=$15,480Total\, uncollectible\, receivables = \$2,100 + \$2,420 + \$2,840 + \$8,120 = \$15,480

STEP 10

Now that we have the total uncollectible receivables, we can record the adjusting entry for uncollectible accounts. The adjusting entry is the difference between the total uncollectible receivables and the existing allowance for uncollectible accounts.
Adjusting entry=Total uncollectible receivables−Existing allowanceAdjusting\, entry = Total\, uncollectible\, receivables - Existing\, allowance

STEP 11

Plug in the values for the total uncollectible receivables and the existing allowance to calculate the adjusting entry.
Adjusting entry=$15,480−$,200Adjusting\, entry = \$15,480 - \$,200

STEP 12

Calculate the adjusting entry.
Adjusting entry=$15,480−$2,200=$,280Adjusting\, entry = \$15,480 - \$2,200 = \$,280

STEP 13

Now that we have the adjusting entry, we can record this in the general journal. The entry will be a debit to "Bad Debt Expense" and a credit to "Allowance for Uncollectible Accounts".
\begin{tabular}{|c|c|c|c|} \hline  Date  December31, 202\begin{array}{c}\text { Date } \\ \text { December31, } \\ 202\end{array} & General Journal & Debit & Credit \\ \hline & Bad Debt Expense & \$13,280 & \\ & Allowance for Uncollectible Accounts & & \$13,280 \\ \hline\end{tabular}

STEP 14

Finally, we can calculate the net accounts receivable reported in the balance sheet. This is the difference between the total accounts receivable and the updated allowance for uncollectible accounts.
Net accounts receivable=Total accounts receivable−Updated allowanceNet\, accounts\, receivable = Total\, accounts\, receivable - Updated\, allowance

STEP 15

The updated allowance is the sum of the existing allowance and the adjusting entry.
Updated allowance=Existing allowance+Adjusting entryUpdated\, allowance = Existing\, allowance + Adjusting\, entry

STEP 16

Plug in the values for the existing allowance and the adjusting entry to calculate the updated allowance.
Updated allowance=$2,200+$13,280Updated\, allowance = \$2,200 + \$13,280

STEP 17

Calculate the updated allowance.
Updated allowance=$2,200+$13,280=$15,480Updated\, allowance = \$2,200 + \$13,280 = \$15,480

STEP 18

Now, plug in the values for the total accounts receivable and the updated allowance to calculate the net accounts receivable.
Net accounts receivable=$92,000−$15,480Net\, accounts\, receivable = \$92,000 - \$15,480

STEP 19

Calculate the net accounts receivable.
Net accounts receivable=$92,000−$15,480=$76,520Net\, accounts\, receivable = \$92,000 - \$15,480 = \$76,520The net accounts receivable reported in the balance sheet is $76,520.

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