Evaluating Accounts Receivable Balances Ready Manufacturing made credit sales of $650,000 during the 12-month period ending June 30, 2000. At June 30, the company prepared the following aging schedule:

The Allowance for Uncollectibles on the company’s books at June 30 is $13,000. Assuming the estimated percentages used for aging are considered correct:

a. What adjustment, if any, is needed to bring the allowance for uncollectibles to the desired level? Give the journal entry needed to accomplish the desired change.

b. The sales manager of Ready Manufacturing feels the company would increase sales if it extended its normal collection cycle by 30 days and sold on terms of 2/10, n/60 rather than its existing terms of 2/10, n/30. Should the president accept or reject the recommendation? Why?
What factors should be considered?

c. What suggestions would you make with regard to the management of accounts receivable by Ready Manufacturing?

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Receivable Amount Number of Days Outstanding Estimated Percent That Will Be Collected $170,000 Less than 30 60,000 31-60 40,000 61-90 80,000 More than 90 5227 95% 92 90 75