Question

Estimating Uncollectible Accounts and Reporting Accounts Receivable
LaFond Company analyzes its accounts receivable at December 31, and arrives at the age categories below along with the percentages that are estimated as uncollectible.

Age Group	Accounts Receivable	Estimated Loss %
0-30 days past due	$ 90,000	1%
31-60 days past due	20,000	2
61-120 days past due	11,000	5
121-180	6,000	10
Over 180 days past due	4,000	25
Total accounts receivable	$ 131,000

The balance of the allowance for uncollectible accounts is $520 on December 31, before any adjustments.

(a) What amount of bad debts expense will LaFond report in its income statement for the year?
$Answer

(b) Use the financial statement effects template to record LaFond's bad debts expense for the year.

Use negative signs with your answers, when appropriate.

	Balance Sheet
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contributed Capital	+	Earned Capital
Record bad debts expense	Answer		Answer		Answer		Answer		Answer

Income Statement
Revenue	-	Expenses	=	Net Income
Answer		Answer		Answer

(c) What is the balance of accounts receivable on it December 31 balance sheet?
$Answer

Answer 1

a) Age Group 0-30 days past due 31-60 days past due 61-120 days past due 121-180 Over 180 days past due Total accounts receivable Accounts Estimated Estimated Receivable Loss % Loss $ $90,000 1% $900 ($90000 x 1%] $20,000 2% $400 ($20000 x 2%] $11,000 5% $550 ($11000 x 5%] $6,000 10% $600 ($6000 x 10%] $4,000 25% $1,000 ($4000 x 25%] $131,000 $3,450 Estimated bad debt expense for the year $520 Less: Existing balance in allowance account $2,930 Amount of bad debts expense that LaFond will report in its income statement for the year

b) Financial statement effects template to record LaFond's bad debts expense for the year: Balance Sheet + + Noncash Assets -$2,930 Transaction Record bad debts expense Cash Asset $0 + Contributed Capital $0 Liabilities $0 Earned Capital -$2,930 + + + Revenue $0 Income Statement Expenses $2,930 Net Income -$2,930 = c) Total accounts receivable $131,000 Less: Estimated bad debt expense for the year $3,450 [Ref: Aging schedule in Part-(a)] Balance of accounts receivable on it December 31 balance sheet $127,550