Question Outlaw Bike Co. is a wholesaler of motorcycle supplies. An aging of the

Question

Question 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 Percent Age Class Not past due 1-30 days past due 31-60 days past due 61-90 days past due 91-180 days past due Over 180 days past due Balance Uncollectible 892,000 285,000 101,000 63,000 43,100 17,700 $1,401,800 50 80 Estimate what the proper balance of the allowance for doubtful accounts should be as of December 31

Explanation / Answer

Answer

Age Class

Balance

Percent Uncollectible

Amount Uncollectible

Not Past due

$892000

0.75%

$6690

1 - 30

$285000

1%

$2850

31-60

$101000

8%

$8080

61-90

$63000

16%

$10080

91-180

$43100

50%

$21550

Over 180 days

$17700

80%

$14160

TOTAL

$1,401,800

$63,410

Allowances for doubtful accounts balance before adjustment

$5,140

Debit

Allowances for doubtful accounts balance after adjustment should be

$63,410

Credit

Allowance for Doubtful accounts is hence to be credit by

$68,550

$5140 for making balance credit and additional $63410 for uncollectable accounts.

General Journal

Dr

Cr

Bad Debt Expenses

$68,550

Allowance for doubtful accounts

$68,550

Age Class

Balance

Percent Uncollectible

Amount Uncollectible

Not Past due

$892000

0.75%

$6690

1 - 30

$285000

1%

$2850

31-60

$101000

8%

$8080

61-90

$63000

16%

$10080

91-180

$43100

50%

$21550

Over 180 days

$17700

80%

$14160

TOTAL

$1,401,800

$63,410

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