Innovative tech inc uses the percentage of credit sales

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Innovative Tech Inc. uses the percentage of credit sales method to estimate bad debts each month and then uses the aging method at year-end. During Nov. 2010, ITI sold services on account for $100,000 and estimated that 1/2 of one% of those sales would be uncollectible. At its Dec 31 year-end, total Accts Receivables is $89,000, aged as follows:(1) 1-30 days old,$75,000 (2) 31-90 days old, $10,000 (3) more than 90 days old, $4000.Experience has shown that for each age group, the average rate of uncollectibility is (1) 1% (2) 15% (3) 40% respectively. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accts has a $1600 credit balance at Dec. 31,2010. 1) Prepare the November 2010 adjusting entry for bad debts. 2) Prepare a schedule to estimate an appropriate year-end balance for the allowance for doubtful accts. 3) Prepare Dec. 31,2010 adjusting entry. 4) Show how the various accts related to accts receivable should be shown on the Dec. 31,2010 balance sheet.

Reference no: EM13598921

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