Young and Old Corporation (YOC) uses two aging categories to estimate uncollecti

Question

Young and Old Corporation (YOC) uses two aging categories to estimate uncollectible accounts. Accounts less than 70 days are considered young and have a 6% uncollectible rate. Accounts more than 70 days are considered old and have a 40% uncollectible rate.

1. If YOC has $17,300 of young accounts and $45,500 of old accounts, how much should be reported in the Allowance for Doubtful Accounts?

2. If YOC's Allowance for Doubtful Accounts currently has an unadjusted credit balance of $5,600, how much should be credited to the account?

3. If YOC's Allowance for Doubtful Accounts has an unadjusted debit balance of $740, how much should be credited to the account?

Explanation / Answer

Young and Old Corporation (YOC) uses two aging categories to estimate uncollectible accounts. Accounts less than 70 days are considered young and have a 6% uncollectible rate. Accounts more than 70 days are considered old and have a 40% uncollectible rate. 1. If YOC has $17,300 of young accounts and $45,500 of old accounts, how much should be reported in the Allowance for Doubtful Accounts? $692 + $18200 = $18892 2. If YOC's Allowance for Doubtful Accounts currently has an unadjusted credit balance of $5,600, how much should be credited to the account? $13,292 3. If YOC's Allowance for Doubtful Accounts has an unadjusted debit balance of $740, how much should be credited to the account? $19632

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