Estimating Allowance for Doubtful Accounts Kirchhoff Industries has a past histo

Question

Estimating Allowance for Doubtful Accounts Kirchhoff Industries has a past history of uncollectible accounts, as shown below Age Class Not past due 1-30 days past due 31-60 days past due 61-90 days past due Over 90 days past due Estimate the allowance for doubtful accounts, based on the aging of receivables schedule below Percent Uncollectible 2% 6 20 30 45 Kirchhoff Industries Aging-of-Receivables Schedule Balance 704,800 10,700 21,600 6,500 11,800 25,900 781,300 Not Past Due 1-30 Days Past Due 31-60 Days Past Due 61-90 Days Past Due Over 90 Days Past Due 415,800 Customer Subtotals Conover Industries Keystone Company Moxie Creek Inc. Rainbow Company Swanson Company Totals Percentage uncolectible Allowance for Doubtful Accounts 155,100 63,400 35,200 35,300 10,700 21,600 6,500 11,800 25,900 441,700 2% 166,900 5% 69,900 2096 56,800 30% 46,000 45%

Explanation / Answer

Allowance for doubtful accounts is calculated as follows:-

Allowance for Doubtful Accounts = Total Balance*Percent Uncollectible

For Past due = $441,700*2% = $8,834

For 1-30 days past due = $166,900*6% = $10,014

For 31-60 days past due = $69,900*20% = $13,980

For 61-90 days past due = $56,800*30% = $17,040

For Over 90 days past due = $46,000*45% = $20,700

Total Allowance for doubtful accounts = $8,834+$10,014+$13,980+$17,040+$20,700 = $70,568

  

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