Question

Heller Corporation has aged its accounts receivable and estimated uncollectible accounts as follows (in millions):

Age of Receivables	Balance	Estimated % uncollectible
Current	$13,000	2%
30-60 days past due	3,400	3%
61-90 days past due	2,700	5%
Over 90 days past due	1,840	11%
Total	$20,940

You need to:

1.      Determine the appropriate allowance for uncollectible accounts.

2.      How will Heller Corporation report its accounts receivable on the balance sheet?

3.      List everything that would happen if the company increased its estimate of % uncollectible for the over 90 days past due receivables to 12%.

4.      Ignoring #3 (the change in uncollectible estimate) and assuming that the A/R has already been reported as in #2, list what would happen if the company learned that a customer owing $100 in the over 90 days past due receivables has filed for bankruptcy, and the Heller will be unable to collect the receivable.

Answer 1

Answer

1.

age of receivable	balance	estimated % uncollectible	Expected uncollectible amount
current	13000	2%	260
30-60 days past due	3400	3%	102
61 -90 days past due	2700	5%	135
Over 90 days past due	1840	11%	202
Total	37500		699

Appropriate allowance for the uncollectible accounts = $699

2.

Accounts receivable will be reported in the balsnce sheet in its net amount that is, accounts receivable less the allowance for uncollectible account as follows:

Accounts receivable                                       $20940

Less: Allowanc for uncollectible account        $699

Net Accounts receivable                                 $20241

3.

age of receivable	balance	estimated % uncollectible	Expected uncollectible amount
current	13000	2%	260
30-60 days past due	3400	3%	102
61 -90 days past due	2700	5%	135
Over 90 days past due	18400	12%	221
Total	20940		718

Appropriate allowance for the uncollectible accounts = $718

Accounts receivable will be reported in the balsnce sheet in its net amount that is, accounts receivable less the allowance for uncollectible account as follows:

Accounts receivable                                       $20940

Less: Allowanc for uncollectible account        $718

Net Accounts receivable                                 $20222

4.

if the company learned that a customer owing $100 in the over 90 days past due receivables has filed for bankruptcy, and the Heller will be unable to collect the receivable.

Then,

Accounts receivable                                       $20940

Less: Allowanc for uncollectible account     

($718+$100)                                                     $818

Net Accounts receivable                                 $20122