Explain accounting treatment for bad debt
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Hachey Company has accounts receivable of $95,100 at March 31, 2007. An analysis of the accounts shows these amounts.
Balance, March 31
Month of Sale 2007 2006
March 65,000 75,000
February 12,600 8,000
Dec and Jan 10.100 2,400
Nov and Oct 7,400 1,100
______ ______
95,100 86,500
Credit terms are 2/10, n/30. At March 31, 2007, there is a $2,200 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The companyâ??s estimates of bad debts are:
Estimated Percentage
Age of Accounts Uncollectible
Current 2%
1-30 days past due 7
31-90 days past due 30
Over 90 days 50
INSTRUCTIONS
A) Determine the total estimated uncollectibles
B) Prepare the adjusting entry at March 31, 2007, to record bad debts expense
C) Discuss the implications of the changes in the aging schedule from 2006 to 2007.
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