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Balance in Allowance for Doubtful Accounts at Year End

Bayside Company operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in the Company's Accounts Receivable account was $4,965,000
and the Allowance for Doubtful Accounts had a credit balance of $360,000

The year-end balance reported in the balance sheet for the Allowance for Doubtful Accounts will be based on the aging schedule shown below.

Days Account Outstanding Amount Probability of Collection
Less than 16 days $2,700,000 0.95
Between 16 and 30 days $900,000 0.90
Between 31 and 45 days $720,000 0.80
Between 46 and 60 days $360,000 0.75
Between 61 and 75 days $240,000 0.50
Over 75 days $45,000 0.00

Instructions:
(a) What is the appropriate balance for the Allowance for Doubtful Accounts at the year-end?

Days Account Outstanding Amount Probability of Collection Doubtful Accts:
Less than 16 days $2,700,000 0.95 $135,000
Between 16 and 30 days
Between 31 and 45 days
Between 46 and 60 days
Between 61 and 75 days
Over 75 days

Enter text answer here.

(b) Show how Accounts Receivable would be presented on the balance sheet.

Account Title Amount
Less: Account Title Amount
Text Title Formula

(c) What is the dollar effect of the year-end bad debt adjustment on the before-tax income?
Enter text answer as desired here.
Be sure to prepare the necessary adjusting journal entry.

Account Title Amount
Account Title Amount

Estimated amount required in the Allowance for Doubtful Accounts Amount
Text explanation as required. Amount

Required charge to expense Formula.

Solution Preview

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Answers are given below as required by you in the given sequence. Details are available in the excel file attached for your clear understanding. Word document of the answers is also attached herewith for your ready reference.

Answers:
(a) What is the appropriate balance for the Allowance for Doubtful Accounts at the year-end?

Days Account Outstanding Amount Probability of Collection Doubtful Accts:

Less than 16 days ...

Solution Summary

This solution provides a detailed a computation of the given accounting problem in Excel.

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