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Required information 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

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Required information 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) 4 percent, (b) 11 percent, and (C) 33 percent, respectively. At December 31, 2019 (end of the current accounting year), the Accounts Receivable balance was $49,800 and the Allowance for Doubtful Accounts balance was $1,100 (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 14,100 Collection 3,400 Collection 3,400 Balance 14,100 10,700 7,300 Date 02/28/2019 04/15/2019 11/30/2019 D. Donalds-Account Receivable Explanation Debit Credit Sale 22,000 Collection 8,000 Collection 4,600 Balance 22,000 14,000 9,400 Date 11/30/2019 12/15/2019 N. Napier-Account Receivable Explanation Debit Credit Sale 8,400 Collection 2,600 Balance 8,400 5,800 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 4,300 Collection 4,300 Sale 9,700 Collection 4,900 Sale 21,200 Collection 5,400 Sale 2,500 Balance 4,300 0 9,700 4,800 26,000 20,600 23,100 Date 12/30/2019 T. Thomas-Account Receivable Explanation Debit Credit Sale 4,200 Balance 4,200 P6-3 Part 1 Required: 1. Compute the total accounts receivable in each age category. Amount $ 0 Not yet due Up to one year past due More than one year past due Total accounts receivable 0

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