Question

O Mail - Erstberger, Cameron M X + wileyplus.com/edugen/lti/main.uni Return to Blackboard Kieso, Intermediate Accounting, 16e Help System Announcements ATOR PRINTER VERSION « BACK Question 16 Nash Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Nash's Accounts Receivable account was $597,800 and Allowance for Doubtful Accounts had a credit balance of $40,970. The year-end balance reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below. Probability of Days Account Outstanding A mount Collection Less than 16 days $318,900 0.97 Between 16 and 30 days 114,700 Between 31 and 45 days 86,600 0.86 Between 46 and 60 days 40,800 0.78 Between 61 and 75 days 20,400 0.58 Over 75 days 16,400 0.00 0.90 Assume that accounts with a zero percent chance of collection are intended to be written off What is the appropriate balance for Allowance for Doubtful Accounts at year-end? Balance for Allowance for Doubtful Accounts LINK TO TEXT Show how accounts receivable would be presented on the balance sheet. NASH CORPORATION Balance Sheet (Partial) LINK TO TEXT What is the dollar effect of the year-end bad debt adjustment on the before-tax income? Dollar effect of the year-end bad debt adjustment

Answer 1

Amount Days Accounting Outstanding Amount Probability Recoverable Less than 16 days 16 - 30 days 31 - 45 days 46- 60 days 61 -75 days Over 75 days $3,09,333 97% $3,18,900 $1,14,700 90% $1,03,230 $74,476 $86,600 86% $40,800 78% $31,824 $20,400 58% $11,832 0% $16,400 $0 S5,30,695 Total Receivable A/c before Year end Adjustments S5,97,800 Less Receivables Written Off -$16,400 S5,81,400 Less Amount of Allowance for Doubtful Accounts -$50,705 (Balancing Figure) Amount Recoverable S5,30,695 Balance for Allowance for Doubtful Accounts S50,705 Accounts Receivable A/c $5,81,400 Less Amount of Allowance for Doubtful Accounts -$50,705 S5,30,695