Question

Percent uncollectible 1% 3% 5% 8% 12%

Customer Accounts Receivable Days Past Due
BCC Company $ 5,400 11
Lannister Company 2,400 0
Mike Properties 6,400 106
Ted Reeves 1,200 80
Jen Steffens 3,400 42
Create an aging of accounts receivable schedule of accounts receivable by age similar to the table given above. Calculate the estimated balance for the Allowance for Doubtful Accounts.

Answer 1

To estimate the balance for the Allowance for Doubtful Accounts, one must apply the percentage uncollectible to each account based on its age, but the example lacks age categories to complete the calculation. This method helps banks to evaluate the riskiness of their loans and plan for potential loan defaults.

Step-by-step explanation:

When creating an aging of accounts receivable schedule, it is important to categorize each account by its age and apply the appropriate percentage uncollectible to estimate the balance for the Allowance for Doubtful Accounts. In the example provided, it seems that different percentages are applied to accounts depending on the length of time the receivable has been outstanding. To calculate the estimated balance, you multiply each account's balance by its respective uncollectible percentage and sum these amounts.

Unfortunately, without specific age categories for Mike Properties and Jen Steffens' accounts, we cannot complete the calculations. Nevertheless, such an analysis is fundamental for a bank to anticipate the riskiness of its loans and to prepare accordingly for potential defaults.