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Estimating Uncollectible Accounts and Reporting Accounts Receivable Collins Company analyzes its accounts receivable at December 31,...

Estimating Uncollectible Accounts and Reporting Accounts Receivable
Collins Company analyzes its accounts receivable at December 31, and arrives at the aged categories below along with the percentages that are estimated as uncollectible.

Age Group

Accounts

Receivable

Estimated

Loss %
0-30 days past due $110,000 1%
31-60 days past due 40,000 2
61-120 days past due 27,000 5
121-180 days past due 14,000 10
Over 180 days past due 9,000 25
Total accounts receivable $200,000

The balance of the allowance for uncollectible accounts is $1,100 on December 31, before any adjustments.

(a) What amount of bad debts expense will Collins report in its income statement for the year?

(b) Use the financial statement effects template to record Collin's bad debts expense for the year.

Use negative signs with your answers, when appropriate.

(c) What is the balance of accounts receivable on it December 31 balance sheet?

Solutions

Expert Solution

(a) What amount of bad debts expense will Collins report in its income statement for the year?    [Refer working note 1]
$5,800

.

.

(b) Use the financial statement effects template to record Collin's bad debts expense for the year.
Balance Sheet
Transaction Cash Asset + Non-cash assets = Liabilities + Contributed Capital + Earned Capital
Record bad debts expense $0

($5,800)

(Allowance for Uncollectible Accounts))

 $0 $0

($5,800)

(Retained earnings decrease)

.

Income Statement
Revenue - Expenses = Net Income

$5,800

(Bad debt expense)

 ($5,800)

.

.

(c) What is the balance of accounts receivable on it December 31 balance sheet?    [Refer working note 3]
$193,100

.

.

Working note 1 - Calculation of bad debt expense
Adjusted balance of Allowance for Uncollectible Accounts        [Refer working note 2] $6,900
Less: Credit balance of Allowance for Uncollectible Accounts $1,100
Bad Debt Expense for the year $5,800
Working note 2 - Computation of adjusted balance of allowance for Uncollectible accounts
Accounts Age Balance

(a)		 Estimated Percent Uncollectible

(b)		 (a x b)
0-30 days past due $110,000 1% $1,100
31–60 days past due $40,000 2% $800
61-120 days past due $27,000 5% $1,350
121 - 180 days past due $14,000 10% $1,400
Over 180 days past due $9,000 25% $2,250
Adjusted balance $6,900
Working note 3 - Balance of accounts receivable on it December 31 balance sheet
Account receivables (Gross) $200,000
Less: Balance of Allowance for uncollectible Account at December 31   [Refer working note 2] $6,900
Account receivables (Net) $193,100

ekkarill92 answered 2 years ago
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