Estimating Uncollectible Accounts and Reporting Accounts Receivable: Collins Company analyzes its accounts receivable at December 31 and arrives at the age categories below along with the percentages that are estimated as uncollectible. The balance of the allowance for uncollectible accounts is $1,100 on December 31, before any adjustments. 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 A/R $200,000 What amount of bad debt expense will Collins reports in its income statement for the year? Use the financial statement effects template to record Collins’ bad debt expense for the year. What is the balance of accounts receivable on its December 31 balance sheet? What is the amount (as a %) of estimated uncollectible receivables?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
- Estimating Uncollectible Accounts and Reporting Accounts Receivable: Collins Company analyzes its accounts receivable at December 31 and arrives at the age categories below along with the percentages that are estimated as uncollectible. The balance of the allowance for uncollectible accounts is $1,100 on December 31, before any adjustments.
|
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 A/R |
$200,000 |
|
- What amount of
bad debt expense will Collins reports in its income statement for the year? - Use the financial statement effects template to record Collins’ bad debt expense for the year.
- What is the balance of accounts receivable on its December 31 balance sheet?
- What is the amount (as a %) of estimated uncollectible receivables?
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