Reference no: EM131806845

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) 3 percent, (b) 8 percent, and (c) 31 percent, respectively.

At December 31, 2014 (end of the current accounting year), the Accounts Receivable balance was $52,400, and the Allowance for Doubtful Accounts balance was $1,040 (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	15,000		15,000
6/30/2013	Collection		4,900	10,100
1/31/2014	Collection		3,800	6,300

 

D. Donalds-Account Receivable
Date	Explanation	Debit	Credit	Balance
2/28/2014	Sale	22,300		22,300
4/15/2014	Collection		7,700	14,600
11/30/2014	Collection		4,600	10,000

 

N. Napier-Account Receivable
Date	Explanation	Debit	Credit	Balance
11/30/2014	Sale	9,200		9,200
12/15/2014	Collection		2,400	6,800

 

S. Strothers-Account Receivable
Date	Explanation	Debit	Credit	Balance
3/2/2012	Sale	5,300		5,300
4/15/2012	Collection		5,300	0
9/1/2013	Sale	10,900		10,900
10/15/2013	Collection		3,500	7,400
2/1/2014	Sale	22,100		29,500
3/1/2014	Collection		8,200	21,300
12/31/2014	Sale	3,100		24,400

 

T. Thomas-Account Receivable
Date	Explanation	Debit	Credit	Balance
12/30/2014	Sale	4,900		4,900
1. Total accounts receivable: not due yet: up to one year past due: more than one year past due: 2.  Compute the estimated uncollectible amount for each age category and in total. not due yet: up to one year past due: more than one year past due: total: 3. Show how the amounts related to accounts receivable should be presented on the 2014 income statement and balance sheet.