Reference no: EM13849920
Determining Bad Debt Expense Based on Aging Analysis LO6-3 [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 uncollectability is (a) 9 percent, (b) 13 percent, and (c) 33 percent, respectively. At December 31, 2014 (end of the current accounting year), the Accounts Receivable balance was $51,500, and the Allowance for Doubtful Accounts balance was $1,090 (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, 2014, follow: B. Brown—Account Receivable Date Explanation Debit Credit Balance 3/11/2013 Sale 13,900 13,900 6/30/2013 Collection 4,200 9,700 1/31/2014 Collection 3,100 6,600 D. Donalds—Account Receivable Date Explanation Debit Credit Balance 2/28/2014 Sale 21,800 21,800 4/15/2014 Collection 7,100 14,700 11/30/2014 Collection 4,300 10,400 N. Napier—Account Receivable Date Explanation Debit Credit Balance 11/30/2014 Sale 8,000 8,000 12/15/2014 Collection 2,300 5,700 S. Strothers—Account Receivable Date Explanation Debit Credit Balance 3/2/2012 Sale 4,300 4,300 4/15/2012 Collection 4,300 0 9/1/2013 Sale 9,200 9,200 10/15/2013 Collection 3,800 5,400 2/1/2014 Sale 21,500 26,900 3/1/2014 Collection 6,100 20,800 12/31/2014 Sale 3,800 24,600 T. Thomas—Account Receivable Date Explanation Debit Credit Balance 12/30/2014 Sale 4,200 4,200 .
Required: 1. Compute the total accounts receivable in each age category
not yet due ----------------
up to one year past due ------------------------
greater than one year past due -----------------
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 -----------
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