Question

Rigney Inc. uses the allowance method to estimate uncollectible accounts receivable. The company produced the following aging of the accounts receivable at year-end.

Calculate the total estimated bad debts based on the below information.

Number of Days Outstanding

Total 0-30 31-60 61-90 91-120 Over 120
Accounts receivable 303,500 98,400 65,400 59,600 43,600 $36,500
% uncollectible 1% 4% 5% 8% 20%
Estimated bad debts ___ ___ ___ ___ ___ ___

Answer 1

The total estimated bad debts for Rigney Inc., calculated using the percentages for each age category of accounts receivable, is $22,309.

Step-by-step explanation:

To calculate the total estimated bad debts based on the aging of accounts receivable for Rigney Inc., we will apply the respective percentage of uncollectibility to each age category of accounts receivable. We do this to estimate the amount of receivables that will not be collected.

• 0-30 days: $303,500 x 1% = $3,035
• 31-60 days: $98,400 x 4% = $3,936
• 61-90 days: $65,400 x 5% = $3,270
• 91-120 days: $59,600 x 8% = $4,768
• Over 120 days: $36,500 x 20% = $7,300

Summing up these estimated uncollectible amounts, we get the total estimated bad debts:

$3,035 + $3,936 + $3,270 + $4,768 + $7,300 = $22,309.

This figure represents the amount Rigney Inc. should anticipate as uncollectible and should therefore be reflected in the allowance for doubtful accounts on the balance sheet.