Oceanside Company Uses the Balance Sheet Approach in Estimating Uncollectible

question 11

Multiple Choice

Oceanside Company uses the balance sheet approach in estimating uncollectible accounts expense. It has just completed an aging analysis of accounts receivable at December 31, 2009. This analysis disclosed the following information: $$\begin{array} { | l | c | c | } \hline & \text { Age } & \text { Percentage } \\\hline & \text { Group } & \text { Considered } \\\hline & \text { Total } & \text { Uncollectible } \\\hline \text { Not yet due } & \$ 52,000 & 1 \% \\\hline 1 - 30 \text { days past due } & \$ 30,000 & 2 \% \\\hline 31 - 60 \text { past due } & \$ 13,000 & 8 \% \\\hline\end{array}$$ What is the appropriate balance for Oceanside's Allowance for Impairment at December 31, 2009

• A) $95,000.
• B) 2% of credit sales in 2009.
• C) $1,560.
• D) $2,160.

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Definitions:

Wage Rates

Wage rates refer to the standard amount of compensation offered to employees for their labor services per unit of time or unit of output.

Labor Costs

Expenses associated with compensating the workforce, including wages, salaries, benefits, and related taxes paid by an employer for the work done by employees.

Total Costs

The total of variable and fixed expenses associated with the creation of goods or services.

Wage Rates

Refers to the fixed amount of compensation paid to employees for their labor, typically expressed per hour, day, or piece produced.