Question

Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectibility is (a) 9 percent, (b) 12 percent, and (c) 35 percent, respectively.

At December 31, 2019 (end of the current accounting year), the Accounts Receivable balance was $49,900 and the Allowance for Doubtful Accounts balance was $1,000 (credit). In determining which accounts have been paid, the company applies collections to the oldest sales first. To simplify, only five customer accounts are used; the details of each on December 31, 2019, follow:

B. Brown—Account Receivable
Date	Explanation	Debit	Credit	Balance
03/11/2018	Sale	14,200		14,200
06/30/2018	Collection		4,300	9,900
01/31/2019	Collection		4,700	5,200

D. Donalds—Account Receivable
Date	Explanation	Debit	Credit	Balance
02/28/2019	Sale	21,100		21,100
04/15/2019	Collection		8,500	12,600
11/30/2019	Collection		4,500	8,100

N. Napier—Account Receivable
Date	Explanation	Debit	Credit	Balance
11/30/2019	Sale	8,900		8,900
12/15/2019	Collection		1,900	7,000

S. Strothers—Account Receivable
Date	Explanation	Debit	Credit	Balance
03/02/2017	Sale	5,300		5,300
04/15/2017	Collection		5,300	0
09/01/2018	Sale	10,500		10,500
10/15/2018	Collection		3,700	6,800
02/01/2019	Sale	22,300		29,100
03/01/2019	Collection		7,200	21,900
12/31/2019	Sale	3,200		25,100

T. Thomas—Account Receivable
Date	Explanation	Debit	Credit	Balance
12/30/2019	Sale	4,500		4,500

Required:

1. Compute the estimated uncollectiable amount for each age category and in total

Not yet Due______

Up to one year past due______

More than one year past due____

Total accounts recieveable___

2) Journal Entry

3)Partial Income Statement & Partial Balance sheet

Answer 1

1)

	Bal. Amount	Uncollectible %	Amount
Not yet due	$                14,700	9%	$                  1,323
Up to one year past due	$                30,000	12%	$                  3,600
More than one year past due	$                  5,200	35%	$                  1,820
Total	$                49,900		$                  6,743

2)

Date	General Journal	Debit	Credit
31-12-2019	Bad Debt Expense	$    5,743
	Allowance for doubtful accounts		$    5,743
	(6743-1000)

3)

BLUE SKIES EQUIPMENT COMPANY
Income Statement (partial)
For the Year Ended December 31, 2019
Operating expenses:
Bad Debt Expense	$    5,743

BLUE SKIES EQUIPMENT COMPANY
Balance Sheet (partial)
As of December 31, 2019
Current assets:
Accounts receivable (net)	$        49,900
Less: Allowance for doubtful accounts	$         -6,743
Accounts receivable (net)		$        43,157

W.N

			31-Dec-19
Party Name	Date	n/60	Age in Days	Balance	Category
B.Brown	11-Mar-18	10-May-18	600	$        5,200	More Than one Year Past Due
D. Donalds	28-Feb-19	29-Apr-19	246	$        8,100	Upto One Year Past Due
N. Napier	30-Nov-19	29-Jan-20	-29	$        7,000	Not Yet Due
S. Strothers	01-Sep-18	31-Oct-18	426	$              -	More Than one Year Past Due
S. Strothers	02-Jan-19	03-Mar-19	303	$      21,900	Upto One Year Past Due
S. Strothers	31-Dec-19	29-Feb-20	-60	$        3,200	Not Yet Due
T. Thomas	30-Dec-19	28-Feb-20	-59	$        4,500	Not Yet Due