3 During 2024, its first year of operations, Riley Construction provides services on account of
104,000. Riley estimates that 25% of the uncollected accounts will be uncollectible. In 2025, the company writes off uncollectible accounts of
14,850. Record the write-off of accounts receivable in 2025. 3-b. Calculate the balance of Allowance for Uncollectible Accounts at the end of 2025 (before adjustment in 2025). Complete this question by entering your answers in the tabs below. Required 1 Required 2a Required 2b Required 3a Required 3b Record the adjusting entry for uncollectible accounts on December 31, 2024. (If no entry is required for a particular transaction/event, select “No Journal Entry Required” in the first account field.) View transaction list Check my work
The Correct Answer and Explanation is:
To record the required transactions for Riley Construction’s uncollectible accounts, we will go through each step systematically, ensuring all calculations and journal entries are clear.
1. Adjusting Entry for Uncollectible Accounts (2024)
In 2024, Riley Construction estimates that 25% of the uncollected accounts will be uncollectible. The total accounts receivable for 2024 is 104,000. Therefore, the estimated uncollectible amount is: 104,000×25%=26,000104,000 \times 25\% = 26,000104,000×25%=26,000
This is the estimated balance for the Allowance for Uncollectible Accounts at the end of 2024. Riley would make an adjusting journal entry on December 31, 2024, to account for this estimate.
Adjusting Entry:
- Debit: Bad Debt Expense $26,000
- Credit: Allowance for Uncollectible Accounts $26,000
2. Write-off of Accounts Receivable in 2025
In 2025, Riley writes off $14,850 in uncollectible accounts. To record the write-off, Riley needs to remove the amounts from both Accounts Receivable and the Allowance for Uncollectible Accounts.
Write-off Journal Entry:
- Debit: Allowance for Uncollectible Accounts $14,850
- Credit: Accounts Receivable $14,850
This entry reduces both the Accounts Receivable balance and the Allowance for Uncollectible Accounts by the amount written off.
3. Balance of Allowance for Uncollectible Accounts at the End of 2025 (Before Adjustment)
After the write-off of $14,850, the balance in the Allowance for Uncollectible Accounts at the end of 2025 (before any further adjustments) can be calculated by subtracting the write-off from the Allowance for Uncollectible Accounts at the end of 2024.
- Initial balance in Allowance for Uncollectible Accounts (12/31/2024): $26,000
- Less: Write-off in 2025: $14,850
26,000−14,850=11,15026,000 – 14,850 = 11,15026,000−14,850=11,150
So, the balance of Allowance for Uncollectible Accounts at the end of 2025 (before adjustment) is $11,150.
Summary of Journal Entries:
- Adjusting Entry for Uncollectible Accounts (2024):
- Debit: Bad Debt Expense $26,000
- Credit: Allowance for Uncollectible Accounts $26,000
- Write-off of Accounts in 2025:
- Debit: Allowance for Uncollectible Accounts $14,850
- Credit: Accounts Receivable $14,850
- Balance of Allowance for Uncollectible Accounts (12/31/2025 before adjustment): $11,150
These entries reflect Riley Construction’s method of estimating and managing its uncollectible accounts. The final balance will change after any further adjustments or new estimates for 2025.
