Perry Materials Supply Uses the Aging Method to Account for Uncollectible

question 132

Essay

Perry Materials Supply uses the aging method to account for uncollectible accounts. At the end of the year, the balance in Accounts receivable was $146,000 and Perry prepared the following aging schedule.
$$\begin{array} { | l | r | r | r | r | r | } \hline { \text { Customer } } & 1 - 30 \text { days } & 31 - 60 \text { days } & 61 - 90 \text { days } & \begin{array} { c } \text { Over 90 } \\\text { days }\end{array} & \begin{array} { r } \text { Total } \\\text { Balance }\end{array} \\\hline \text { Tohnson } & \$ 4,600 & \$ 3,200 & & & \$ 7,800 \\\hline \text { Hot Pots, Inc. } & & & \$ 800 & \$ 1,000 & 1,800 \\\hline \text { Potter } & 40,000 & 550 & & & 40,550 \\\hline \text { Harrison } & & 3,600 & 900 & & 4,500 \\\hline \text { Marx } & & & 2,000 & 50 & 2,050 \\\hline \text { Younger } & 65,000 & & & & 65,000 \\\hline \text { Merry Maids } & 5,900 & & & & 5,900 \\\hline \text { Archer } & 12,000 & 6,400 & & & 18,400 \\\hline \text { Total } & \$ 127,500 & \$ 13,750 & \$ 3,700 & \$ 1,050 & \$ 146,000 \\\hline \text { Uncollectible percentage } & & & & & \\\hline \text { Estimated uncollectible } & & & & & \\\text { amount } & & & & & \\\hline\end{array}$$ Based on past history, Perry uses 2% for current receivables (1-30 days), 10% for 31-60 days, 20% for 61-90 days, and 40% for over 90 days. Please complete the schedule and calculate the estimated amount of uncollectible accounts.

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Definitions:

Clarity

The quality of being easily understood or free from ambiguity.

Order Instrument

A negotiable instrument that is payable “to the order of an identified person” or “to an identified person or order.”

Payee

The individual or entity to whom a check, draft, or note is made payable.

Identified

Recognized or determined to be a particular entity or object, especially through specific characteristics or methods.