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P6-3 (Algo) Determining Bad Debt Expense Based on Aging Analysis LO6-2 [The following information applies to the questions displayed below.] Blue Skies Equipment Company uses
P6-3 (Algo) Determining Bad Debt Expense Based on Aging Analysis LO6-2 [The following information applies to the questions displayed below.] 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) 5 percent, (b) 13 percent, and (c) 34 percent, respectively. At December 31, 2019 (end of the current accounting year), the Accounts Receivable balance was $49,100 and the Allowance for Doubtful Accounts balance was $940 (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 Sale Collection Collection Debit 13,500 Credit Balance 13,500 4,000 9,500 4,400 5,100 D. Donalds-Account Receivable Debit 22,000 Date: Explanation 02/28/2019 04/15/2019 11/30/2019 Sale Collection Collection Credit Balance 22,000 8,100 13,900 4,500 9,400 Date 11/30/2019 12/15/2019 N. Napier-Account Receivable Explanation Sale Debit 8,100 Credit Balance 8,100 Collection 2,300 5,800 S. Strothers-Account Receivable Date Explanation Debit Credit Balance 03/02/2017 Sale 4,100 4,100 04/15/2017 Collection 4,100 0 09/01/2018 Sale 10,400 10,400 10/15/2018 Collection 4,700 5,700 02/01/2019 Sale 21,800 27,500 03/01/2019 Collection 6,700 20,800 12/31/2019 Sale 2,800 23,600 Date 12/30/2019 T. Thomas-Account Receivable Explanation Sale Debit 5,200 Credit Balance 5,200 P6-3 Part 2 2. Compute the estimated uncollectible amount for each age category and in total. P6-3 Part 2 2. Compute the estimated uncollectible amount for each age category and in total. Not yet due Up to one year past due More than one year past due Total Amount $ 0
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