Question

The company history reveals the following percentages of each total class will ultimately become uncollectible: Not Yet Due 1 - 30 days late 31 - 60 days late 61 - 90 days late 91 or more days late 1% 2% 5% 25% 50% Use the information to calculate what the ending balance in Allowance for Doubtful Accounts should be at the end of the year. Show all work:

Answer 1

The ending balance in allowance for doubtful accounts is computed as follows:

Uncollectible Accounts Receivable Allowance for doubtful Delinquency Balance Percentage accounts Not yet due $1,000 $100,000 1% 1- 30 days late $25,000 $500 2% $600 31 -60 days late $12,000 5% 61-90 days late $5,000 25% $1,250 91 or more days late $1,000 $500 50% Ending Balance $143,000 $3,850

Hence, the allowance for doubtful accounts will be created to the extent of $3,850.