Marian Company used the allowance method of accounting for doubtful accounts. The following summary schedule was prepared from an aging of accounts receivable outstanding on December 31: Number of days outstanding Probability of collection Amount 0 - 30 days 31 - 60 days Over 60 days 5,000,000 2,000,000 1,000,000 .98 .90 .80 The following additional information is available for the current year: Net credit sales for the year Allowance for doubtful accounts: 40,000,000 Balance, January 1 Balance before adjustment, December 31 450,000 (cr) 20,000 (dr) The entity based the estimate of doubtful accounts on the aging of accounts receivable. What amount should be recognized as doubtful accounts expense for the current year?
Marian Company used the allowance method of accounting for doubtful accounts. The following summary schedule was prepared from an aging of accounts receivable outstanding on December 31: Number of days outstanding Probability of collection Amount 0 - 30 days 31 - 60 days Over 60 days 5,000,000 2,000,000 1,000,000 .98 .90 .80 The following additional information is available for the current year: Net credit sales for the year Allowance for doubtful accounts: 40,000,000 Balance, January 1 Balance before adjustment, December 31 450,000 (cr) 20,000 (dr) The entity based the estimate of doubtful accounts on the aging of accounts receivable. What amount should be recognized as doubtful accounts expense for the current year?
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Marian Company used the allowance method of accounting for
doubtful accounts.
The following summary schedule was prepared from an aging of
accounts receivable outstanding on December 31:
Probability
of collection
Number of days
outstanding
Amount
0 – 30 days
31 – 60 days
Over 60 days
5,000,000
2,000,000
1,000,000
.98
.90
.80
The following additional information is available for the current year:
Net credit sales for the year
Allowance for doubtful accounts:
40,000,000
Balance, January 1
Balance before adjustment, December 31
450,000 (cr)
20,000 (dr)
The entity based the estimate of doubtful accounts on the aging of
accounts receivable.
What amount should be recognized as doubtful accounts expense for
the current year?
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