Estimating Doubtful Accounts Outlaw Bike Co. is a wholesaler of motorcycle supplies. An aging of the company’s accounts receivable on December 31, and a historical analysis of the percentage of uncollectible accounts in each age category are as follows: Age Class Balance Percent Uncollectible Not past due $630,000 3/4 % 1–30 days past due 69,300 2 31-60 days past due 31,500 8 61–90 days past due 22,700 15 91–180 days past due 16,400 39 Over 180 days past due 12,000 75 $781,900 Estimate what the proper balance of the allowance for doubtful accounts should be as of December 31. Age Class Balance Percent Uncollectible Estimated Uncollectible Accounts Amount Not past due $630,000 3/4% $fill in the blank 1 1-30 days past due 69,300 2 fill in the blank 2 31-60 days past due 31,500 8 fill in the blank 3 61-90 days past due 22,700 15 fill in the blank 4 91-180 days past due 16,400 39 fill in the blank 5 Over 180 days past due 12,000 75 fill in the blank 6 Total $781,900 $fill in the blank 7 Feedback Apply the respective uncollectible percentage to each age interval including the not past due group. Add these to determine the allowance for doubtful accounts balance.
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.
Estimating Doubtful Accounts
Outlaw Bike Co. is a wholesaler of motorcycle supplies. An aging of the company’s
| Age Class | Balance | Percent Uncollectible | ||
| Not past due | $630,000 | 3/4 | % | |
| 1–30 days past due | 69,300 | 2 | ||
| 31-60 days past due | 31,500 | 8 | ||
| 61–90 days past due | 22,700 | 15 | ||
| 91–180 days past due | 16,400 | 39 | ||
| Over 180 days past due | 12,000 | 75 | ||
| $781,900 |
Estimate what the proper balance of the allowance for doubtful accounts should be as of December 31.
Age Class |
Balance |
Percent Uncollectible |
Estimated Uncollectible Accounts Amount |
||
| Not past due | $630,000 | 3/4% | $fill in the blank 1 | ||
| 1-30 days past due | 69,300 | 2 | fill in the blank 2 | ||
| 31-60 days past due | 31,500 | 8 | fill in the blank 3 | ||
| 61-90 days past due | 22,700 | 15 | fill in the blank 4 | ||
| 91-180 days past due | 16,400 | 39 | fill in the blank 5 | ||
| Over 180 days past due | 12,000 | 75 | fill in the blank 6 | ||
| Total | $781,900 | $fill in the blank 7 |
Apply the respective uncollectible percentage to each age interval including the not past due group. Add these to determine the allowance for doubtful accounts balance.
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