8:59 PM CALCULATOR MESSAGE MY ENSTRUCTOR FUL SCREEN PRENTER VERSION BACK OURCES
ID: 2520449 • Letter: 8
Question
8:59 PM CALCULATOR MESSAGE MY ENSTRUCTOR FUL SCREEN PRENTER VERSION BACK OURCES Problem 7-3 Whispering Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Whispering's Accounts Receivable account was $603,800 and Allowance for Doubtful Accounts had a credit on the aging schedule shown below. Probability of Days Account Outstanding Less than 16 days Between 16 and 30 days Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days Amount $318,300 115,700 89,200 43,400 21,200 16,000 Collection 0.96 0.90 0.86 0.78 0.50 0.00 Study Assume that accounts with a zero percent chance of collection are intended to be written off. What is the appropriate balance for Allowance for Doubtful Accounts at year-end? Balance for Allowance for Doubtful Accounts Show how accounts receivable would be presented on the balance sheet. WHISPERING CORPORATION Balance Sbeet (Partial)Explanation / Answer
Age-group Accounts receivable Estimated Unrealisable Estimated Allowance balance Les than 16 days 318300 4% 12732 16-30 days 115,700 10% 11570 31-45 days 89200 14% 12488 46-60 days 43400 22% 9548 61-75 days 21200 50% 10600 Over 75 days 16000 To be written off 603800 56938 Write off of $16,000 (oer 75 days aging) Allowance for doubtful Accounts Dr. 16000 Accounts receivable 16000 Bad debts expense for the year: Beginning balance of allowancce 43550 Less: Write of 16000 Existing balanc ein Accounts receivable 27550 Req uired balance in Allowance 56938 Bad debts expense for the year: 29388 Therefore, Appropriate balance of Allowancec for doubtfule debts: $ 56938 Accounts receivable in Balance Sheet: Accounts receivable (Gross) (603800-16000) 587800 Less: Allowance for uncollectible accounts 56938 Net balance in Aaccounts receivable 530862
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