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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