Question
Sunbury Office Supply estimates uncollectible accounts by aging its receivables. At December 31, 2026, before any year-end adjustment:
| Age of account | Balance | Estimated uncollectible |
|---|
| Not yet due | $150,000 | 2% |
| 1–60 days past due | $60,000 | 6% |
| Over 60 days past due | $30,000 | 20% |
| Total | $240,000 | |
Write-offs during 2026 were larger than expected, so the Allowance for Doubtful Accounts has a debit balance of $2,100 before adjustment.
Required:
- Bad Debt Expense — the bad debt expense for the year-end adjustment.
- Journal Entry — the December 31, 2026 adjustment. Use Bad Debt Expense and Allowance for Doubtful Accounts.
- Net Receivables — the net realisable value of receivables on the statement of financial position.
Statements in this challenge
- Bad Debt ExpenseNumeric Answer
- Journal EntryJournal Entry
- Net ReceivablesNumeric Answer
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IFRS 9 — expected credit losses
The allowance is an estimate of receivables that will not be collected, recognised before any specific account is known to have failed. Keep the two mechanics apart: setting or adjusting the allowance affects profit, whereas writing a specific account off against an existing allowance does not.
Common mistakes
- Recording the full estimate as the expense when the allowance already carries a balance — under the balance-sheet approach the entry is the movement needed, not the target.
- Taking a write-off of a specific debt to expense a second time when an allowance already exists.
- Reducing the receivable directly and leaving no allowance account, which loses the gross amount.
Further readingIFRS 9: expected credit losses