Question

Young and Old Corporation (YOC) uses two aging categories to estimate uncollectible accounts. Accounts less than 60 days are considered young and have a 5% uncollectible rate. Accounts more than 60 days are considered old and have a 40% uncollectible rate. Required: 1. If YOC has $100,000 of young accounts and $400,000 of old accounts, how much should be reported in the Allowance for Doubtful Accounts

Answer 1

$165,000

Step-by-step explanation:

The computation of the reported amount for Allowance for Doubtful Accounts is shown below:

= Young accounts × uncollectible percentage + old accounts balance × uncollectible percentage

= $100,000 × 5% + $400,000 × 40%

= $5,000 + $160,000

= $165,000

We simply added the young accounts and old account balance after considering the uncollected percentage