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Innovative Tech Incorporated (ITI) has been using the percentage of credit sales method to estimate...

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Accounting

Innovative Tech Incorporated (ITI) has been using the percentage of credit sales method to estimate bad debts. During November, ITI sold services on account for $120,000 and estimated that 3/4 of 1 percent of those sales would be uncollectible.
Required:
Prepare the November adjusting entry for bad debts.
Starting in December, ITI switched to using the aging method. At its December 31 year-end, total Accounts Receivable is $99,800, aged as follows: (1)1 to 30 days old, $83,000; (2)31 to 90 days old, $12,000; and (3) more than 90 days old, $4,800. The average rate of uncollectibility for each age group is estimated to be (1)12 percent, (2)24 percent, and (3)48 percent, respectively. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts.
Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $2,000 credit balance at December 31. Prepare the December 31 adjusting entry.
Show how the various accounts related to accounts receivable should be shown on the December 31 balance sheet.

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