Question

On Dec 31, 2016,RawdaCompany hadaccounts receivable of $750,000and allowance fordoubtful accounts that had a debit balance of $10,000.The company uses an aging schedule(agingmethod)to estimateits uncollectible accounts as shown in the following table:

# of Days Outstanding	Amounts	Estimated % Uncollectible
0-30	$     200,000	2%
31-60	200,000	4%
61-90	200,000	6%
Over 90	150,000	8%

Requirements:

A. What is therequired balance for theallowance ofdoubtful accounts on Dec 31, 2016?

B. What is the net realizable value of the accounts receivable on Dec 31, 2016?

C. If on May 1, 2017, one of the company’s customer that owed the company $21,000 filedbankruptcy, what is the balance of the allowance fordoubtful accounts on May 1, 2017?

D. If On July 31, 2017, the customer that filed a bankruptcy on May 1, 2017came back and paidRadwda $15,000, what is the balance of the allowance for doubtful accounts on July 31, 2017?

Answer 1

# of Days Outstanding	Amount	Estimated % Uncollectible	Estimated amount Uncollectible
0-30	200000	2%	4000
31-60	200000	4%	8000
61-90	200000	6%	12000
Over 90	150000	8%	12000
Total	750000		36000
A
Required balance for the allowance of doubtful accounts	36000
B
Net realizable value of the accounts receivable	714000	=750000-36000
C
Allowance for doubtful accounts on May 1, 2017	15000	=36000-21000
D
Allowance for doubtful accounts on July 31, 2017	30000	=15000+15000