Question

Waterway Industries uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts receivable at year-end.

(a)

Calculate the total estimated bad debts based on the information below.

				Number of Days Outstanding
		Total		0–30		31–60		61–90		91–120		Over 120
Accounts receivable		$506,000		$333,000		$93,000		$47,000		$20,000		$13,000
% uncollectible				1%		4%		5%		8%		11%
Estimated bad debts		$enter estimated bad debts in dollars		$enter estimated bad debts in dollars		$enter estimated bad debts in dollars		$enter estimated bad debts in dollars		$enter estimated bad debts in dollars		$enter estimated bad debts in dollars

Answer 1

	Total	0–30	31–60	61–90	91–120	Over 120
Accounts receivable	$ 506,000	$ 333,000	$ 93,000	$ 47,000	$ 20,000	$ 13,000
% uncollectible		1%	4%	5%	8%	11%
Estimated bad debts (Accounts receivable * %uncollectible)	$    12,430	$      3,330	$    3,720	$    2,350	$    1,600	$    1,430

Total estimated baddebts = $12,430

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