allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Fortner’ s usual credit terms are net 30 days. The balance in Allowance for Doubtful Accounts was $ 130,000 at January 1, 2014. During 2014, credit sales totaled $ 9,000,000, interim provisions for doubtful accounts were made at 2 % of credit sales, $ 90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $ 15,000. Fortner installed a computer system in November 2014, and an aging of accounts receivable was prepared for the first time as of December 31, 2014. A summary of the aging is as follows. Based on the review of collectability of the account balances in the“ prior to 1 / 1 / 14” aging category, additional receivables totaling $ 60,000 were written off as of December 31, 2014. The 80 % uncollectible estimate applies to the remaining $ 90,000 in the category. Effective with the year ended December 31, 2014, Fortner adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.
Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31, 2014. Show supporting computations in good form.( Hint: In computing the 12 / 31 / 14 allowance, subtract the $ 60,000 write-off.)
Prepare the journal entry for the year-end adjustment to Allowance for Doubtful Accounts balance as of December 31, 2014.
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