Question
Bradford Supply Co. estimates uncollectible accounts using an aging schedule. At December 31, 2025 its accounts receivable were aged as follows, and the Allowance for Doubtful Accounts had an unadjusted credit balance of $1,100.
| Age of Receivable | Amount | Estimated % Uncollectible |
|---|
| Not yet due | $60,000 | 2% |
| 1–30 days past due | 20,000 | 5% |
| 31–60 days past due | 12,000 | 10% |
| Over 60 days past due | 5,000 | 40% |
During 2026:
| Date | Event |
|---|
| February 14 | The account of Colton Traders, $900, was determined to be uncollectible and written off. |
| June 3 | Colton Traders unexpectedly paid the $900 previously written off, in cash. |
Required: Prepare the December 31, 2025 adjusting entry, the February 14 write-off, and the two entries for the June 3 recovery (reinstate the account, then record the collection).
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 — accrual basis of accounting
Adjusting entries exist to move revenue and expense into the period they belong to, regardless of when cash moved. Every adjusting entry touches at least one income statement account and one balance sheet account — and never the cash account, because the cash has either already moved or has not moved yet.
Common mistakes
- Debiting or crediting Cash in an adjusting entry — a reliable sign the entry is wrong.
- Adjusting for the full amount of a prepayment rather than only the expired portion.
- Missing accrued items entirely because no document prompted them — accrued interest and accrued wages are the usual casualties.
Further readingThe 5 types of adjusting entry