Question

Estimating Doubtful Accounts

Outlaw 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.

Outlaw Bike Co.
Estimation of Uncollectible Accounts
December 31
Age Class	Balance	Percent Uncollectible	Estimated Uncollectible Accounts Amount
Not past due	$864,000	1/2%	$fill in the blank 1
1-30 days past due	95,000	3%	fill in the blank 2
31-60 days past due	43,200	8%	fill in the blank 3
61-90 days past due	31,100	16%	fill in the blank 4
91-180 days past due	22,500	38%	fill in the blank 5
Over 180 days past due	16,400	75%	fill in the blank 6
Total	$1,072,200		$fill in the blank 7

Answer 1

Age Class	Balance	Percent Uncollectible	Estimated Uncollectible Accounts Amount
Not past due	$864,000	1/2%	864,000 x 1/2% = $4,320
1-30 days past due	95,000	3%	95,000 x 3% = $2,850
31-60 days past due	43,200	8%	43,200 x 8% = $3,456
61-90 days past due	31,100	16%	31,100 x 16% = $4,976
91-180 days past due	22,500	38%	22,500 x 38% = $8,550
Over 180 days past due	16,400	75%	16,400 x 75% = $12,300
Total	$1,072,200		$36,452

Balance of Allowance for doubtful account at December 31 = $36,452