Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectibility is (a) 2 percent, (b) 13 percent, and (c) 34 percent, respectively.

At December 31, 2014 (end of the current accounting year), the Accounts Receivable balance was $51,900, and the Allowance for Doubtful Accounts balance was $1,030 (credit). In determining which accounts have been paid, the company applies collections to the oldest sales first. To simplify, only five customer accounts are used; the details of each on December 31, 2014, follow:

B. BrownAccount Receivable
Date	Explanation	Debit	Credit	Balance
3/11/2013	Sale	14,300		14,300
6/30/2013	Collection		4,600	9,700
1/31/2014	Collection		4,600	5,100

D. DonaldsAccount Receivable
Date	Explanation	Debit	Credit	Balance
02/28/2014	Sale	22,400		22,400
04/15/2014	Collection		7,200	15,200
11/30/2014	Collection		5,900	9,300

N. NapierAccount Receivable
Date	Explanation	Debit	Credit	Balance
11/30/2014	Sale	9,900		9,900
12/15/2014	Collection		1,100	8,800

S. StrothersAccount Receivable
Date	Explanation	Debit	Credit	Balance
03/02/2012	Sale	4,200		4,200
04/15/2012	Collection		4,200	0
09/01/2013	Sale	10,500		10,500
10/15/2013	Collection		3,900	6,600
02/01/2014	Sale	21,100		27,700
03/01/2014	Collection		8,100	19,600
12/31/2014	Sale	3,900		23,500

T. ThomasAccount Receivable

Date

Explanation

Debit

Credit

Balance

12/30/2014

Sale

5,200

5,200

1. Compute the total accounts receivable in each age category.

	Amount
Not yet due
Up to one year past due
More than one year past due

2. Compute the estimated uncollectible amount for each age category and in total.

	Amount
Not yet due
Up to one year past due
More than one year past due
Total	$0

3. Prepare journal entry for bad debt expense at December 31, 2014.

Record the journal entry for bad debt expense at December 31, 2014.

4. Show how the amounts related to accounts receivable should be presented on the 2014 income statement and balance sheet.

BLUE SKIES EQUIPMENT COMPANY
Income Statement (partial)
For the Year Ended December 31, 2014
Operating expenses:

BLUE SKIES EQUIPMENT COMPANY
Balance Sheet (partial)
As of December 31, 2014
Current assets:
Accounts receivable (net)		$0