Question
A company has two aging categories for its accounts receivable: accounts that are in good standing (030 days old) and accounts that are delinquent (3190
A company has two aging categories for its accounts receivable: accounts that are in good standing (030 days old) and accounts that are delinquent (3190 days old). If any portion of the balance is more than 90 days old, it is written off as bad debt. After analyzing accounting records, the following accounts receivable matrix was generated.
Paid | Bad Debt | Good Standing | Delinquent | |
Paid | 1.00 | 0.00 | 0.00 | 0.00 |
Bad Debt | 0.00 | 1.00 | 0.00 | 0.00 |
Good Standing | 0.60 | 0.00 | 0.25 | 0.15 |
Delinquent | 0.45 | 0.25 | 0.20 | 0.10 |
The company currently has outstanding balances of $1.5 million in good standing accounts receivable and $250,000 in delinquent accounts receivable.
Compute the estimated proportions and amounts of good standing accounts receivable and delin- quent accounts receivable that will be paid off and that will be written off as bad debt.
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