|
From inception of operations to December 31, 2020, Bridgeport
Corporation provided for uncollectible accounts receivable under
the allowance method. The provisions are recorded, based on
analyses of customers with different risk characteristics. Bad
debts written off were charged to the allowance account; recoveries
of bad debts previously written off were credited to the allowance
account, and no year-end adjustments to the allowance account were
made. Bridgeport’s usual credit terms are net 30 days.
The balance in Allowance for Doubtful Accounts was $131,300 (Cr.)
at January 1, 2020. During 2020, credit sales totaled $9,101,900,
the provision for doubtful accounts was determined to be $182,038,
$91,019 of bad debts were written off, and recoveries of accounts
previously written off amounted to $19,950. Bridgeport installed a
computer system in November 2020, and aging of accounts receivable
was prepared for the first time as of December 31, 2020. A summary
of the aging is as follows.
|
Classification by
Month of Sale
|
|
Balance in
Each Category
|
|
Estimated %
Uncollectible
|
|
November–December 2020
|
|
$1,275,500
|
|
|
2%
|
|
July–October
|
|
655,900
|
|
|
10%
|
|
January–June
|
|
449,700
|
|
|
27%
|
|
Prior to 1/1/20
|
|
158,000
|
|
|
74%
|
|
|
$2,539,100
|
|
|
|
Based on the review of collectability of the account balances in
the “prior to 1/1/20” aging category, additional receivables
totaling $59,000 were written off as of December 31, 2020. The 74%
uncollectible estimate applies to the remaining $99,000 in the
category. Effective with the year ended December 31, 2020,
Bridgeport adopted a different method for estimating the allowance
for doubtful accounts at the amount indicated by the year-end aging
analysis of accounts receivable.
|