As Perry Materials Supply was preparing for the year-end close, their balances were as follows: Accounts Receivable - Dr 146,000 and Allow for uncollectible Accounts - Dr 6,200 Perry Materials uses the aging method and has completed the following analysis of the accounts receivable: Customer 1-30 Days 31-60 Days 61-90 Days Over 90 Days Total Balance Johnson $4,600 $3,200 $7,800 Hot Pots, Inc. 800 1,000 1,800 Potter 40,000 550 40,550 Harrison 3,600 900 4,500 Marx 2,000 50 2,050 Younger 65,000 65,000 Merry Maids 5,900 5,900 Acher 12,000 6,400 18,400 Totals $127,500 $13,750 $3,700 $1,050 $146,000 Uncollectible percentage 2% 10% 20% 40% Estimated uncollectible amount $2,550 $1,375 $740 $420 $5,085 Required: 1. How much will the Uncollectible account expense for the year be? 2. What will the final balance in the Allowance account be, after adjusting for uncollectible account expense?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question 5
As Perry Materials Supply was preparing for the year-end close, their balances were as follows:
Perry Materials uses the aging method and has completed the following analysis of the accounts
receivable:
Customer 1-30 Days 31-60 Days 61-90 Days
Over 90
Days
Total
Balance
Johnson $4,600 $3,200 $7,800
Hot Pots, Inc. 800 1,000 1,800
Potter 40,000 550 40,550
Harrison 3,600 900 4,500
Marx 2,000 50 2,050
Younger 65,000 65,000
Merry Maids 5,900 5,900
Acher 12,000 6,400 18,400
Totals $127,500 $13,750 $3,700 $1,050 $146,000
Uncollectible percentage 2% 10% 20% 40%
Estimated uncollectible
amount $2,550 $1,375 $740 $420 $5,085
Required:
1. How much will the Uncollectible account expense for the year be?
2. What will the final balance in the Allowance account be, after adjusting for uncollectible
account expense?
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