Estimating Uncollectible Accounts and Reporting Accounts Receivable LaFond Company analyzes its accounts receivable at December 31,...

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Estimating Uncollectible Accounts and Reporting Accounts Receivable LaFond Company analyzes its accounts receivable at Decemb

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Answer 1

Answer #1

Solution a:

Computation of Allowance for Uncollectible Accounts
Ageing	Accounts Receivables	% Uncollectible	Required Allowance
0-30 days	$80,000.00	1%	$800.00
31-60 days	$20,000.00	2%	$400.00
61-120 days past due	$14,000.00	5%	$700.00
120-180 days	$6,000.00	10%	$600.00
More than 180 days	$4,000.00	25%	$1,000.00

Total	$124,000.00		$3,500.00

Amount of bad debts expense to be reported in income statement = Required balance in allowance account - Existing balance

= $3,500 - $450 = $3,050

Solution b:

Transaction

Balance Sheet

Income statement

Cash

+

Non Cash Assets

=

Liabilities

+

Contributed capital

+

Earned Capital

Revenue

-

Expenses

=

Net Income

Record bad debts expense

$0.00

-$3,050.00

$0.00

-$3,050.00

$0.00

$3,050.00

-$3,050.00

Solution c:

Balance of accounts receivables on Dec 31 balance sheet = Gross receivables - Allowance for doubtful accounts

= $124,000 - $3,500 = $120,500

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Answer 2

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