EX 9-11 Estimating doubtful accounts

Traditional Bikes Co. is a wholesaler of motorcycle supplies. An aging of the company’s accounts receivable on December 31, 2014, and a historical analysis of the percentage of uncollectible accounts in each age category are as follows:


Age Interval Balance
Percent
Uncollectible
Not past due $ 740,000 ½%
1–30 days past due 390,000 2
31–60 days past due 85,000 4
61–90 days past due 28,000 14
91–180 days past due 42,000 32
Over 180 days past due 15,000 80
$1,300,000






Estimate what the proper balance of the allowance for doubtful accounts should be as of December 31, 2014.


Answer:



Age Interval Balance
Estimated
Uncollectible Accounts
Percent Amount
Not past due $ 740,000 0.5% $ 3,700
1–30 days past due 390,000 2% 7,800
31–60 days past due 85,000 4% 3,400
61–90 days past due 28,000 14% 3,920
91–180 days past due 42,000 32% 13,440
Over 180 days past due 15,000 80% 12,000
Total $1,300,000 $44,260