The allowance for uncollectible accounts has an existing positive balance of $6,840. The company's internal auditors suggest that the following percentages be used to estimate the amount of outstanding receivables that will eventually prove to be uncollectible. 0-30 days 0.50% 31-60 days 1.00% 61-90 days 10.00% 91-120 days 70.00% Required Calculate the projected new balance for (a) the allowance for uncollectible accounts and (b) the bad debts expense. (a) Allowance for uncollectible accounts
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.
Aging of
The Miller Company's accounts receivable reveal the following balances by age category:
| Age of Account | Receivable Balance |
|---|---|
| 0-30 days | $160,000 |
| 31-60 days | 36,000 |
| 61-90 days | 16,000 |
| 91-120 days | 8,000 |
| $220,000 |
The allowance for uncollectible accounts has an existing positive balance of $6,840. The company's internal auditors suggest that the following percentages be used to estimate the amount of outstanding receivables that will eventually prove to be uncollectible.
| 0-30 days | 0.50% |
| 31-60 days | 1.00% |
| 61-90 days | 10.00% |
| 91-120 days | 70.00% |
Required
Calculate the projected new balance for (a) the allowance for uncollectible accounts and (b) the
| (a) | Allowance for uncollectible accounts |
|
| (b) | Bad debt expense |
|
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