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:

Overhead Volume Variance

The difference between the budgeted overhead costs based on standard production volumes and the actual overhead costs incurred due to changes in production activity levels.

Standard Overhead Cost

The predetermined rate of allocating fixed and variable overhead expenses to goods or services produced.

Actual Overhead

Actual overhead refers to the real costs incurred for overhead expenses, such as utilities, rent, and administrative costs, during a given period.

Direct Materials Price

The cost per unit of raw materials that are directly traceable to the production of goods.