Chapter 6 - Question 4 - 7.pdf - P6-3 Determining Bad Debt Expense Based on Aging Analysis LO6-2[The following information applies to the questions

Chapter 6 - Question 4 - 7.pdf - P6-3 Determining Bad Debt...

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P6-3 Determining Bad Debt Expense Based on Aging Analysis LO6-2 P6-3 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 ) 9 percent, ( b ) 16 percent, and ( c ) 35 percent, respectively. At December 31, 2014 (end of the current accounting year), the Accounts Receivable balance was $49,300, and the Allowance for Doubtful Accounts balance was $1,050 (credit). In determining which accounts have been paid, the company applies collections to the oldest sales fi rst. To simplify, only fi ve customer accounts are used; the details of each on December 31, 2014, follow: B. Brown—Account Receivable Date Explanation Debit Credit Balance 3/11/2013 Sale 13,100 13,100 6/30/2013 Collection 4,400 8,700 1/31/2014 Collection 2,800 5,900 D. Donalds—Account Receivable Date Explanation Debit
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