A Company Has the Following Unadjusted Account Balances at December

question 87

Essay

A company has the following unadjusted account balances at December 31,of the current year; Accounts Receivable of $183,400 and Allowance for Doubtful Accounts of $1,600 (credit balance).The company uses the aging of accounts receivable to estimate its bad debts.The following aging schedule reflects its accounts receivable at the current year-end:
$$\begin{array} { l l l } &&\text { Estimated } \\&&\text { Uncollectible } \\\text { Account Age }&\text { Balance }&\text { Percentage }\\\hline \text { Current (not yet due) } & \$ 106,000& 2.0 \% \\\text { 1-30 days past due } &54 , 0 0 0 & 4.0 \% \\\text { 30-60 days past due } &12,000& 10.0 \% \\61 - 90 \text { days past due } & 8,500 & 25.0 \% \\\text { Over 90 days past due } &2 , 9 0 0 & 75.0 \% \\\text { Total } & \underline { \$183,400 } &\end{array}$$
Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31,of the current year,balance sheet.

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Definitions:

Capital Stock

Classes of stock that represent the fractional elements of ownership of a corporation.

Vote at Stockholders' Meetings

The process by which shareholders exercise their right to make decisions on corporate matters presented during company meetings, usually through a voting mechanism.

Voting Rights

The right of shareholders to vote on corporate matters, typically exercised during annual general meetings.

Common Stock

Equity securities representing ownership shares in a corporation, with voting rights and potential dividends.