Solution-What is the appropriate balance for the allowance

What is the appropriate balance for the allowance

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Reference no: EM13505298

BAD DEBT

Chatter Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Chatter's Accounts Receivable account was $389,000 and the Allowance for Doubtful Accounts had a debit balance of $5,000. The year-end balance reported in the balance sheet for the Allowance for Doubtful Accounts will be based on the aging schedule shown below:

Days Account Outstanding	Amount	Probability of Collection
Less than 16 days	$293,000	.97
Between 16 and 30 days	$102,000	.89
Between 31 and 45 days	$ 70,000	.83
Between 46 and 60 days	$ 55,000	.76
Between 61 and 75 days	$ 28,000	.60
Over 75 days	$ 8,000	.30

1. What is the appropriate balance for the Allowance for Doubtful Accounts at year-end?

2. Show how accounts receivable would be presented on the balance sheet.

3. What is the dollar effect of the year-end bad debt adjustment on the before-tax income?

Reference no: EM13505298

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What is the appropriate balance for the allowance

Reference no: EM13505298

Reference no: EM13505298

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