PROBLEM 7-3
(a)
The Allowance for Doubtful Accounts should have a balance of $45,000 at year-end. The
supporting calculations are shown below:
Days Account
Outstanding
Amount
Expected
Percentage
Uncollectible
Estimated Uncollectible
0–15 days
$300,000
.02
$
6,000
16–30 days
100,000
.10
10,000
31–45 days
80,000
.15
12,000
46–60 days
40,000
.20
8,000
61–75 days
20,000
.45
9,000
Balance for Allowance for Doubtful Accounts
$45,000
The accounts which have been outstanding over 75 days ($15,000) and have zero
probability of collection would be written off immediately by a debit to Allowance for
Doubtful Accounts for $15,000 and a credit to Accounts Receivable for $15,000. It is not
considered when deter-mining the proper amount for the Allowance for Doubtful
Accounts.
(b)
Accounts receivable ($555,000 – $15,000)
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- Fall '08
- ABOHABIB
- $40,000, 15 days, $495,000, $555,000, $300,000 16
