Revise your worksheet to reflect these updated assumptions thenanswer the questions that follow.

You have been provided with the following Aging Report to use toadjust the Allowance for Uncollectible Accounts for a company atyear end.

Age Group	Accounts Receivable					Estimated Percent Uncollectible
Not yet due		$	112,000				5	%
1-30 days past due			51,000				10	%
31-60 days past due			50,000				20	%
61-90 days past due			44,000				40	%
Over 90 days past due			29,000				80	%
		$	286,000

Allowance for Uncollectible Accounts	3,200	Credit

After reviewing the data, you note the 'not yet due' category isoverstated by 20%, while the 'Over 90 days' category is understatedby 20%, (this error also caused the AR balance on the schedule tonot equal the amount of Accounts Receivable on the balancesheet).

Also, you note the balance in the Allowance account is actually adebit, rather than a credit. Being that the normal balance for thisaccount is a credit, the accountant hadn't noticed the issue.

Required:
1. Use your spreadsheet to recalculate the neededadjustment and account balances. What will be the balance inAccounts Receivable and the Allowance for Uncollectible Accountsbased on the above information?

2. Prepare the journal entry to adjust theAllowance for Uncollectible Accounts, using your corrected data.(If no entry is required for a particulartransaction/event, select "No Journal Entry Required" in the firstaccount field.)

3. Which statement is true regarding the effect ofthe Allowance account being shown incorrectly as a credit ratherthan as a debit balance in the original account analysis?

• The error caused the journal entry to require a credit to BadDebts Expense rather than a debit.

• Correcting the error increased the amount of Bad Debt Expenserecorded for the period.

• Correcting the error decreased the amount of Bad Debt Expenserecorded for the period.

• The Allowance account and the adjustment were not affected bythe original misstatement, as it was only an estimate.