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    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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