Question

Estimating Doubtful Accounts Outlaw Bike Co. is a wholesaler of motorcycle supplies. An aging of the company’s accounts receivable on December 31, and a historical analysis of the percentage of uncollectible accounts in each age category are as follows:

Age Class Balance Percent Uncollectible
Not past due $892,000 3/4%
1–30 days past due 285,000 4%
31-60 days past due 101,000 8%
61–90 days past due 63,000 16%
91–180 days past due 43,100 50%
Over 180 days past due 17,700 80%
Total $1,401,800
Required:
1. Estimate what the proper balance of the allowance for doubtful accounts should be as of December 31.

Answer 1

$71,960

Step-by-step explanation:

Not past due days $892,000*0.75%=$6,690

1-30 days $285,000*4%=$11,400

31-60 days $101,000*8%=$8,080

61-90 days $63,000*16%=$10,080

91-180 days $43,100*50%=$21,550

Over 180 days $17,700*80%=$14,160

Total allowance for doubtful accounts as at December 31, =$71,960