Question

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The company uses the aging of receivables method to estimate the amount that should be reported in the allowance for doubtful accounts at the end of the period. At the end of the period outstanding accounts receivable total $1,560,000. Of the $1,560,000 in accounts receivable, $120,000 are 1-30 days past due; $80,000 are 31-90 days past due; and $30,000 are more than 90 days past due. The remaining receivables are current (not past due). Based on historical experience, current economic conditions, and the company's credit policy, the company expects the following percentages to be uncollectible from each category of receivables: Current: 1% 1-30 Day past due: 3% 31-90 Days past due:5% More than 90 Days past due: 10% Calculate the balance in "Allowance for Doubtful Accounts" that the company should report at the end of the period. Your Answer:

Answer 1

Balance in the allowance for doubtful accounts

Age Group	Receivables Balance ($)	Percentage of Uncollectibles ($)	Total Estimated Uncollectibles ($)
	(1)	(2)	(3) = (1) x (2)
1-30 days past due	120,000	3.00%	3,600
31-90 days past due	80,000	5.00%	4,000
More than 90 days	30,000	10.00%	3,000
Not yet past due [$1,560,000 - $120,000 - $80,000 - $30,000]	1,330,000	1.00%	13,300
Total	1,560,000		23,900

“Hence, the Balance in the allowance for doubtful accounts will be $23,900”