Question

A year minus−end review of Accounts Receivable and estimated uncollectible percentages revealed the following:

Days Outstanding

Accounts Receivable

Est. Percent Uncollectible

1−30 days

62,000

2 %

31−60 days

$44,000

4 %

61−90 days

$25,000

11 %

Over 90 days

$7,000

51 %

Before the Year −end adjustment, the credit balance in Allowance for Uncollectible Accounts was

$1,400. Under the aging −of −receivables method, the Uncollectible Minus−Account Expense at year−end

is:

A.$7,920.

B.$10,720.

C.$1,240.

D.$9,320.

Answer 1

A.- $ 7,920

Step-by-step explanation:

We multiply each age-group of accounts by the percent of uncollectible amount within the group

62,000 x 2% = 1,240

44,000 x 4% = 1,760

25,000 x 11% = 2,750

7,000 x 51% = 3,570

Total year-end allowance: 9,320

less current balance: (1,400)

year-end adjustment 7,920

This will be the amount we have to adjust the allowance and the bad debt expense to be recognize over the year