HURON COMPANY-3 The uncollectible accounts receivable rate in the sector where the business operates is high. As of December 31, 2019, the balance of the "Accounts Receivable" of the business is $1,250,000. Of these receivables, $850,000 are not yet due. However, receivables worth $400,000 have past due. The aging of these past due receivables has been done, and according to this aging, the collectibility probabilities anticipated by the business are presented in the table below. Days Past Due - Amount $ - Collectibility Probability 1-15 days 180,000 0.98 16-30 days 84,000 0.95 31-60 days 47,000 0.80 61-90 days 35,000 0.70 91-120 days 15,000 0.40 121-240 days 20,000 0.30 More than 241 days 19,000 0.01 Total 400,000 Requirements: 1)The company will implement a policy for allowance for doubtful accounts for the first time at the end of this year. What is the amount of doubtful accounts allowance that needs to be set aside? How will the receivables and allowances be reported in the financial statements? 2)The company has also maintained a policy for allowance for doubtful accounts in previous years, and as of December 31, 2019, the company's existing Allowance for Doubtful Accounts account shows a balance of $22,800. What is the amount of doubtful accounts allowance that needs to be set aside? How will the receivables and allowances be reported in the financial statements? 3)The company has maintained a policy for allowance for doubtful accounts in previous years, and as of December 31, 2019, the company's existing Allowance for Doubtful Accounts account shows a balance of $90,350. What is the amount of doubtful accounts allowance that needs to be set aside? How will the receivables and allowances be reported in the financial statements?
HURON COMPANY-3 The uncollectible accounts receivable rate in the sector where the business operates is high. As of December 31, 2019, the balance of the "Accounts Receivable" of the business is $1,250,000. Of these receivables, $850,000 are not yet due. However, receivables worth $400,000 have past due. The aging of these past due receivables has been done, and according to this aging, the collectibility probabilities anticipated by the business are presented in the table below. Days Past Due - Amount $ - Collectibility Probability 1-15 days 180,000 0.98 16-30 days 84,000 0.95 31-60 days 47,000 0.80 61-90 days 35,000 0.70 91-120 days 15,000 0.40 121-240 days 20,000 0.30 More than 241 days 19,000 0.01 Total 400,000 Requirements: 1)The company will implement a policy for allowance for doubtful accounts for the first time at the end of this year. What is the amount of doubtful accounts allowance that needs to be set aside? How will the receivables and allowances be reported in the financial statements? 2)The company has also maintained a policy for allowance for doubtful accounts in previous years, and as of December 31, 2019, the company's existing Allowance for Doubtful Accounts account shows a balance of $22,800. What is the amount of doubtful accounts allowance that needs to be set aside? How will the receivables and allowances be reported in the financial statements? 3)The company has maintained a policy for allowance for doubtful accounts in previous years, and as of December 31, 2019, the company's existing Allowance for Doubtful Accounts account shows a balance of $90,350. What is the amount of doubtful accounts allowance that needs to be set aside? How will the receivables and allowances be reported in the financial statements?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
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
Transcribed Image Text:HURON COMPANY-3
The uncollectible accounts receivable rate in the sector where the business operates is high. As of December 31, 2019, the balance of the "Accounts Receivable" of the business is $1,250,000. Of these
receivables, $850,000 are not yet due. However, receivables worth $400,000 have past due. The aging of these past due receivables has been done, and according to this aging, the collectibility
probabilities anticipated by the business are presented in the table below.
Days Past Due - Amount $ - Collectibility Probability
1-15 days 180,000 0.98
16-30 days 84,000 0.95
31-60 days 47,000 0.80
61-90 days 35,000 0.70
91-120 days 15,000 0.40
121-240 days 20,000 0.30
More than 241 days 19,000 0.01
Total 400,000
Requirements:
1)The company will implement a policy for allowance for doubtful accounts for the first time at the end of this year. What is the amount of doubtful accounts allowance that needs to be set aside?
How will the receivables and allowances be reported in the financial statements?
2)The company has also maintained a policy for allowance for doubtful accounts in previous years, and as of December 31, 2019, the company's existing Allowance for Doubtful Accounts account
shows a balance of $22,800. What is the amount of doubtful accounts allowance that needs to be set aside? How will the receivables and allowances be reported in the financial statements?
3)The company has maintained a policy for allowance for doubtful accounts in previous years, and as of December 31, 2019, the company's existing Allowance for Doubtful Accounts account shows a
balance of $90,350. What is the amount of doubtful accounts allowance that needs to be set aside? How will the receivables and allowances be reported in the financial statements?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education