Problem

Pachel Corporation reports the following information pertaining to its accounts receivable...

Pachel Corporation reports the following information pertaining to its accounts receivable:

Days Past Due

Current

1-30

31-60   

61-90

Over 90

$60,000

S40,000

$25,000

$12,000

$2,000

The company’s credit department provided the following estimates regarding the percent of accounts expected to eventually be written off from each category listed above:

Current receivables outstanding

2%

Receivables 1-30 days past due

4

Receivables 31-60 days past due

16

Receivables 61-90 days past due

40

Receivables over 90 days past due

90

The company uses a balance sheet approach to estimate credit losses.

a. Record the company’s uncollectible accounts expense, assuming it has a $1,400 credit balance in its Allowance for Doubtful Accounts prior to making the necessary adjustment.  


b. Record the company’s uncollectible accounts expense, assuming it has a $1,600 debit balance in its Allowance for Doubtful Accounts prior to making the necessary adjustment.

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