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P6-4 Determining Bad Debt Expense Based on Aging Analysis LO6-3

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Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectability is (a) 9 percent, (b) 13 percent, and (c) 33 percent, respectively.

At December 31, 2014 (end of the current accounting year), the Accounts Receivable balance was $51,500, and the Allowance for Doubtful Accounts balance was $1,090 (credit). In determining which accounts have been paid, the company applies collections to the oldest sales first. To simplify, only five customer accounts are used; the details of each on December 31, 2014, follow:

B. BrownAccount Receivable
Date	Explanation	Debit	Credit	Balance
3/11/2013	Sale	13,900		13,900
6/30/2013	Collection		4,200	9,700
1/31/2014	Collection		3,100	6,600

D. DonaldsAccount Receivable
Date	Explanation	Debit	Credit	Balance
2/28/2014	Sale	21,800		21,800
4/15/2014	Collection		7,100	14,700
11/30/2014	Collection		4,300	10,400

N. NapierAccount Receivable
Date	Explanation	Debit	Credit	Balance
11/30/2014	Sale	8,000		8,000
12/15/2014	Collection		2,300	5,700

S. StrothersAccount Receivable
Date	Explanation	Debit	Credit	Balance
3/2/2012	Sale	4,300		4,300
4/15/2012	Collection		4,300	0
9/1/2013	Sale	9,200		9,200
10/15/2013	Collection		3,800	5,400
2/1/2014	Sale	21,500		26,900
3/1/2014	Collection		6,100	20,800
12/31/2014	Sale	3,800		24,600

T. ThomasAccount Receivable
Date	Explanation	Debit	Credit	Balance
12/30/2014	Sale	4,200		4,200

References

Section BreakP6-4 Determining Bad Debt Expense Based on Aging Analysis LO6-3

P6-4 Part 1

Required:
	1.Compute the total accounts receivable in each age category. not yet due up to one year past due more than one year past due 2. Compute the estimated uncollectible amount for each age category and in total. Not yet due up to one year past due total more than one year past due

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