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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
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) 9 percent, (b) 13 percent, and (c) 32 percent, respectively. At December 31, 2019 (end of the current accounting year), the Accounts Receivable balance was $51,400 and the Allowance for Doubtful Accounts balance was $950 (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, 2019, follow: Date 03/11/2018 06/30/2018 01/31/2019 B. Brown-Account Receivable Explanation Debit Credit Sale 13,700 Collection 3,200 Collection 4,500 Balance 13,700 10,500 6,000 Date 02/28/2019 04/15/2019 11/30/2019 D. Donalds-Account Receivable Explanation Debit Credit Sale 21,700 Collection 8,100 Collection 5,300 Balance 21,700 13,600 8,300 Date 11/30/2019 12/15/2019 N. Napier-Account Receivable Explanation Debit Credit Sale 9,600 Collection 2,300 Balance 9,600 7,300 Date 03/02/2017 04/15/2017 09/01/2018 10/15/2018 02/01/2019 03/01/2019 12/31/2019 S. Strothers-Account Receivable Explanation Debit Credit Sale 5,000 Collection 5,000 Sale 9,000 Collection 4,000 Sale 21,500 Collection 5,900 Sale 3,300 Balance 5,000 0 9,000 5,000 26,500 20,600 23,900 Date 12/30/2019 T. Thomas-Account Receivable Explanation Debit Credit Sale 5,900 Balance 5,900 Required: 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 Total accounts receivable
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