Question 1 Kingbird Corporation operates in an industry that has a high rate of

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Question 1 Kingbird Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Kingbird's Accounts Receivable account was $595,800 and Allowance for Doubtful Accounts had a credit balance of $40,550. The year-end balance reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below Probability of Amount $316,300 117,200 81,400 44,800 20,300 15,800 Collection 0.96 0.90 0.85 0.80 0.58 0.00 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 Assume that accounts with a zero percent chance of collection are intended to be written off (a) What is the appropriate balance for Allowance for Doubtful Accounts at year-end? Balance for Allowance for Doubtful Accounts

Explanation / Answer

Days Account outstanding amount expected percentage estimated uncollectibles Less than 16 days $316,300 .04 $12,652 16-30 days $117,200 .10 $11,720 31-45days $81,400 .15 $12,210 46-60days $44,800 .20 $8,960 61-75 days $20,300 .42 $8,526 Over 75 days $15,800 0 $0 Balance for allowance for doubtful accounts $54,068

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