Aging Method Bad Debt Expense
The manager of Cayce Printing Service has provided the following aging schedule for Cayce’s accounts receivable:

Accounts
Receivable Category
Amount	 	Proportion Expected
to Default
0-20 days	 	$79,800	 	0.02
21-40 days	 	21,500	 	0.08
41-60 days	 	11,700	 	0.15
Over 60 days	 	5,300	 	0.30
$118,300

The manager indicates that the $118,300 of accounts receivable identified in the table does not include $8,900 of receivables that should be written off.
Required:
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1.  Journalize the $8,900 write-off. If an amount box does not require an entry, leave it blank.

(Record write-off of defaulted account)
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2.   Determine the desired postadjustment balance in allowance for doubtful accounts. Round each aging category to the nearest dollar.
fill in the blank 1 of 1 $
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3.   If the balance in allowance for doubtful accounts before the $8,900 write-off was a debit of $450, compute bad debt expense. Prepare the adjusting entry to record bad debt expense. If an amount box does not require an entry, leave it blank.

(Record adjusting entry for bad debt expense estimate)

Let's go step by step to address each part of the problem.

### 1. Journalize the $8,900 write-off.

The write-off of bad debt requires a journal entry to remove the uncollectible amount from both the accounts receivable and the allowance for doubtful accounts. The entry will look like this:

**Journal Entry:**

| Date        | Account                              | Debit      | Credit     |
|-------------|--------------------------------------|------------|------------|
|             | Allowance for Doubtful Accounts      | $8,900     |            |
|             | Accounts Receivable                  |            | $8,900     |
|             | (Record write-off of defaulted account) |            |            |

---

### 2. Determine the desired postadjustment balance in allowance for doubtful accounts.

Now, we need to calculate the desired postadjustment balance based on the aging method using the given data. For each category, we multiply the amount of receivables by the proportion expected to default, then sum them up.

#### Aging Schedule Calculation:
- **0-20 days**:  
  $79,800 × 0.02 = $1,596
- **21-40 days**:  
  $21,500 × 0.08 = $1,720
- **41-60 days**:  
  $11,700 × 0.15 = $1,755
- **Over 60 days**:  
  $5,300 × 0.30 = $1,590

**Total desired balance in allowance for doubtful accounts**:  
$1,596 + $1,720 + $1,755 + $1,590 = **$6,661**

This is the desired postadjustment balance for allowance for doubtful accounts.

---

### 3. Compute bad debt expense and prepare the adjusting entry.

The next step is to calculate the bad debt expense. Before the $8,900 write-off, the balance in the allowance for doubtful accounts was a debit of $450. After the write-off, the balance would be:

- **Post-write-off balance**: Debit of $450 - $8,900 = **$9,350 debit balance**.

To reach the desired credit balance of $6,661 in allowance for doubtful accounts, we need to adjust the bad debt expense. The adjusting entry must convert the debit of $9,350 to a credit of $6,661. Thus, the bad debt expense will be the sum of $9,350 (to eliminate the debit balance) and $6,661 (to reach the desired credit balance).

**Bad Debt Expense Calculation**:  
$9,350 + $6,661 = **$16,011**

---

### Journal Entry to Record Bad Debt Expense:

| Date        | Account                              | Debit      | Credit     |
|-------------|--------------------------------------|------------|------------|
|             | Bad Debt Expense                     | $16,011    |            |
|             | Allowance for Doubtful Accounts      |            | $16,011    |
|             | (Record adjusting entry for bad debt expense estimate) |            |            |

---

### Summary:

1. The $8,900 write-off journal entry is:
   - Debit Allowance for Doubtful Accounts: $8,900
   - Credit Accounts Receivable: $8,900

2. The desired postadjustment balance in Allowance for Doubtful Accounts is **$6,661**.

3. The bad debt expense is **$16,011**, and the adjusting journal entry is:
   - Debit Bad Debt Expense: $16,011
   - Credit Allowance for Doubtful Accounts: $16,011

---

Do you need further clarification on any step? Here are 5 related questions to expand on this:

1. How does the aging method differ from the percentage of sales method for estimating bad debts?
2. What is the purpose of having an allowance for doubtful accounts?
3. Why is the bad debt expense recorded as an adjusting entry at the end of the period?
4. How would the bad debt expense change if the aging categories had higher or lower default rates?
5. What are the effects of write-offs on the financial statements?

**Tip**: Always ensure the allowance for doubtful accounts reflects a realistic estimate of uncollectible receivables to avoid overstating assets.

The manager of Cayce Printing Service has provided the following aging schedule for Cayce’s accounts receivable: 0-20 days $79,800 with 0.02 proportion expected to default, 21-40 days $21,500 with 0.08 proportion expected to default, 41-60 days $11,700 with 0.15 proportion expected to default, and Over 60 days $5,300 with 0.30 proportion expected to default. The total receivables are $118,300, excluding $8,900 that should be written off. Required: 1) Journalize the $8,900 write-off. 2) Determine the postadjustment balance in allowance for doubtful accounts. 3) If the pre-write-off allowance balance was a debit of $450, compute bad debt expense and prepare the adjusting entry.

Learn how to calculate bad debt using the aging method. This problem provides an example of calculating the desired allowance for doubtful accounts, computing bad debt expense, and preparing journal entries for a company with $118,300 in accounts receivable. Includes step-by-step explanations and calculations.

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