Question

Skysong Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Skysong's Accounts Receivable account was $591,900 and Allowance for Doubtful Accounts had a credit balance of $44,990. 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 $314,500 0.98 Between 16 and 30 days 112,400 0.90 Between 31 and 45 days 85,000 0.86 Between 46 and 60 days 44,200 0.79 Between 61 and 75 days 19,900 0.55 Over 75 days (to be written off ) 15,900 0.00

(a) Your answer is incorrect. Try again. What is the appropriate balance for Allowance for Doubtful Accounts at year-end? Balance for Allowance for Doubtful Accounts

Answer 1

1.Appropriate balance for allowance for Doubtful accounts at year-end:

The accounts which have been outstanding over 75 days (15900) and have 0 probability of collection would be written off immediately by a debt to Allowance for Doubtful debt for 15900 and a credit to accounts receivable for 15900.It is not considered while determining the proper amount for allowance for Doubtful accounts.

Days Account Outstanding Amount Probability of Doulet fue Collection Accounts 0-15 days 3145oo 0,98 6164 16-30 days 112400 lo116 31-45 days 85000 0.86 14 620 46-60 days 44200 0.79 8730 61-75 days 19900 8000 over 75 days 15900 Balance for Allowance for Douletful All. 47630

2. Balance for allowance for Doubtful accounts

Balance for allowance for accounts receivable is $528370.