Question

Sarasota Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Sarasota's Accounts Receivable account was $601,200 and Allowance for Doubtful Accounts had a credit balance of $40,590. The year-end balance reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below. Days Account Outstanding Amount Probability of Collection Less than 16 days $319,700 0.97 Between 16 and 30 days 116,700 0.90 Between 31 and 45 days 86,800 0.86 Between 46 and 60 days 43,700 0.80 Between 61 and 75 days 19,600 0.55 Over 75 days 14,700 0.00 Assume that accounts with a zero percent chance of collection are intended to be written off.

Your answer is correct. What is the appropriate balance for Allowance for Doubtful Accounts at year-end? Balance for Allowance for Doubtful Accounts $ SHOW SOLUTION LINK TO TEXT

Your answer is partially correct. Try again. Show how accounts receivable would be presented on the balance sheet. SARASOTA CORPORATION Balance Sheet (Partial) Net Accounts ReceivableAccounts ReceivableAllowance for Doubtful Accounts $ AddLess : Net Accounts ReceivableAccounts ReceivableAllowance for Doubtful Accounts Net Accounts ReceivableAllowance for Doubtful AccountsAccounts Receivable $

Your answer is partially correct. Try again. 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 $ decreaseincrease

Answer 1

solution 1:

Computation of Allowance for Uncollectible Accounts - Sarasota corporation
Ageing	Accounts Receivables	% Uncollectible	Required Allowance
Less than 16 days	$319,700.00	3%	$9,591.00
Between 16 and 30 days	$116,700.00	10%	$11,670.00
Between 31 and 45 days	$86,800.00	14%	$12,152.00
Between 46 and 60 days	$43,700.00	20%	$8,740.00
Between 61 and 75 days	$19,600.00	45%	$8,820.00
Over 75 days	$14,700.00	100%	$14,700.00
Total	$601,200.00		$65,673.00

Solution 2:

Sarasota Corporation - Balance Sheet (Partial)
Particulars	Amount
Accounts receivables	$601,200.00
Less: Allowance for doubtful accounts	$65,673.00
Net accounts receivables	$535,527.00

Solution 3:

Dollar effect of the year end bad debt adjustment = $65,673 - $40,590 = $25.083 decrease in income