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Paisley Corporation operates in an industry that has a high rate of bad debt. The year-end balance reported in the balance sheet for the Allowance

Paisley Corporation operates in an industry that has a high rate of bad debt. The year-end balance reported in the balance sheet for the Allowance for Doubtful Accounts will be based on the aging schedule shown below:

Days Account Outstanding Amount Probability of Not Collecting

Less than 30 days $351,60 .05

Between 31 and 60 days 122,400 .10

Between 61 and 90 days 84,000 .20

Between 91 and 120 days 66,000 .30

Over 120 days $ 9,600 .40

Before year-end adjustments, Paisley's Allowance for Doubtful Accounts had a debit balance of $8,000.

  1. What is the appropriate balance for the Allowance for Doubtful Accounts at year-end?
  2. Show how accounts receivable would be presented on the balance sheet. State the differences between U.S. GAAP and IFRS reporting for accounts receivable.
  3. What is the year-end bad debt adjustment?

Expected Percentage

Days Account Uncollectible Estimated Uncollectible

Outstanding Amount

0-30 days

31-60 days

61-90 days

91-120 days

Over 120 days

Accounts receivable .............................................................................................

Less: Allowance for doubtful accounts ..................................................................

Accounts receivable (net) .....................................................................................

Estimated amount required in the Allowance

for Doubtful Accounts (credit balance) ...............................................................

Balance in the account after write-off of uncollectible

accounts but before adjustment (debit balance) ................................................

Required charge to expense (need to add due to debit balance) ...................

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