Question

Estimating Doubtful Accounts

Performance 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:

Estimate what the proper balance of the allowance for doubtful accounts should be as of December 31.

Performance Bike Co.

Estimation of Uncollectible Accounts

December 31

Age Interval Balance Estimated Uncollectible Accounts Percent Estimated Uncollectible Accounts Amount

Not past due $460,000 3/4% $

1-30 days past due 50,600 2

31-60 days past due 23,000 7

61-90 days past due 16,600 17

91-180 days past due 12,000 39

Over 180 days past due 8,700 80

Total $570,900 $

Answer 1

Calculation of balance of the allowance for doubtful accounts should be as of December 31.

Age Interval	Balance (A)	Estimated Uncollectible Accounts Percent (B)	Estimated Uncollectible Accounts Amount (A*B)
Not past due	$460,000	0.75%	$3,450
1-30 days past due	$50,600	2%	$1,012
31-60 days past due	$23,000	7%	$1,610
61-90 days past due	$16,600	17%	$2,822
91-180 days past due	$12,000	39%	$4,680
Over 180 days past due	$8,700	80%	$6,960
Total	$570,900		$20,534

Allowance for Doubtful Accounts balance as of Dec 31 should be $20,534

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