Reference no: EM13593803
From inception of operations to January 2011 through December 31, 2013, Harris Corporation provided for uncollectible accounts receivable under the allowance method: provisions were made monthly at 2% of credit sales; bad debts written off were charged to the 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. Harris's usual credit terms are net 30 days.
The balance in the allowance for doubtful accounts was $164,000 at January 1, 2013. During 2003 credit sales totaled $8,000,000, interim provisions for doubtful accounts were made at 2% of credit sales, $88,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $12,000. Harris installed a computerm facility in November 2013 and an aging of accounts receivable was prepared for the first time as of December 31, 2013. A summary of the aging is as follows:
Classification by month of sale Balance in each category estimated % uncollectible
Nov-Dec 2013 1,260,000 2%
Jul-Oct 740,000 10%
Jan-June 470,000 25%
Prior to 1/1/03 180,000 60%
2,650,000
Based on the review of collectibility of the account balances in the "prior to 1/1/13" aging category, additional receivables totaling $60,000 were written off as of December 31, 2013. Effective with the year ended December 31,2013, Harris adopted a new accounting 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 the allowance for doubtful accounts for the year ended December 31, 2013, before the year - end adjusting entry. Show supporting computations in good form.
2. prepare journal entry for the year end adjustment to the allowance for doubtful accounts balance as of Dec 31, 2013.