P6-4 Determining Bad Debt Expense Based on Aging Analysis 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 11/60. The balance of each account receivable is aged on the basis of three time period as follows: (l) 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 uncollectability is (a) 3 percent, (b) 9 percent, and (c) 28 percent, respectively. At December 31, 2014 (end of current accounting year), the Accounts Receivable balance was S4S,700, and the Allowance for Doubtful Accounts balance was $900 (credit). In determining which accounts have been paid, the company applies collections to the oldest sales first. To simply, only five customer accounts are used; the details of each on December 31, 2014 follow: B. Brown - Account Receivable Date 3 11 2013 6 30 2013 1/31/2014 2/28/2014 4/15/2014 11 30 2014 11 30 2014 12/15/2014 3/2/2012 4 15 2012 9/1/2013 10 15 2013 2/1/2014 3/1/2014 12/31/2014 12/30/2014 Required: E lanation Sale Collection Collection Sale Collection Collection Sale Collection Debit 13,000 Credit 3,000 3,800 D. Donalds-Account Receivable 21,000 8,000 6,000 N. Na ier- Account Receivable 8,000 1,000 S. Strothers- Account Receivable Sale Collection Sale Collection Sale Collection Sale Sale 4,000 9,000 21,000 4,000 T. Thomas- Account Receivable 4,000 4,000 4,500 5,000 Balance 13,000 10,000 6,200 21,000 13,000 7,000 8,000 7,000 4,000 9,000 4,500 25,500 20,500 24,500 4,000 Compute the total accounts receivable in each age category. 2. Compute the estimated uncollectible amount for each age category' and in total. 3. give the adjusting 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.