Instructions 1Record entry to write off the $15,000 receivable which is over 75 days outstanding 2Calculate the desired credit balance in the Allowance for Doubtful Account using the chart above 3Assuming prior to any adjusting entries the balance in the Allowance for Doubtful Accounts had a credit balance of $40,000, record the year ending adjusting entry for bad debts. **Accounts Receivable Aging and Allowance for Doubtful Accounts Calculation**This table provides an analysis of accounts receivable based on the number of days outstanding, along with the probability of collection, and desired credit balance calculations for accounting purposes.### Table Breakdown:1. **Days Account Outstanding:** - **Less than 16 days**: $300,000 outstanding with a 0.98 probability of collection. - **16-30 days**: $100,000 outstanding with a 0.90 probability of collection. - **31-45 days**: $80,000 outstanding with a 0.85 probability of collection. - **46-60 days**: $40,000 outstanding with a 0.80 probability of collection. - **61-75 days**: $20,000 outstanding with a 0.55 probability of collection. The total amount outstanding is $540,000.2. **Probability of Collection:** - This column lists the likelihood of collecting each account based on the days outstanding. 3. **Probability of Non-Collection:** - Calculated as (1 - Probability of Collection), reflecting the risk of not collecting the outstanding amount.4. **Desired Credit Balance:** - This section suggests a calculation placeholder for determining the desired credit balance based on collection probabilities.### Allowance for Doubtful Accounts:- **Beg Balance:** $40,000- **Desired Credit Balance:** This value corresponds to the determined credit balance after adjusting for allowances.This table is vital for financial analysis, reflecting a company's strategy for handling doubtful accounts and providing accessible credit risk assessments.

Answered: Record entry to write off the $15,000…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Instructions
1	Record entry to write off the $15,000 receivable which is over 75 days outstanding
2	Calculate the desired credit balance in the Allowance for Doubtful Account using the chart above
3	Assuming prior to any adjusting entries the balance in the Allowance for Doubtful Accounts had a credit balance of $40,000, record the year ending adjusting entry for bad debts.

**Accounts Receivable Aging and Allowance for Doubtful Accounts Calculation**

This table provides an analysis of accounts receivable based on the number of days outstanding, along with the probability of collection, and desired credit balance calculations for accounting purposes.

### Table Breakdown:

1. **Days Account Outstanding:**
- **Less than 16 days**: $300,000 outstanding with a 0.98 probability of collection.
- **16-30 days**: $100,000 outstanding with a 0.90 probability of collection.
- **31-45 days**: $80,000 outstanding with a 0.85 probability of collection.
- **46-60 days**: $40,000 outstanding with a 0.80 probability of collection.
- **61-75 days**: $20,000 outstanding with a 0.55 probability of collection.

The total amount outstanding is $540,000.

2. **Probability of Collection:**
- This column lists the likelihood of collecting each account based on the days outstanding.

3. **Probability of Non-Collection:**
- Calculated as (1 - Probability of Collection), reflecting the risk of not collecting the outstanding amount.

4. **Desired Credit Balance:**
- This section suggests a calculation placeholder for determining the desired credit balance based on collection probabilities.

### Allowance for Doubtful Accounts:

- **Beg Balance:** $40,000
- **Desired Credit Balance:** This value corresponds to the determined credit balance after adjusting for allowances.

This table is vital for financial analysis, reflecting a company's strategy for handling doubtful accounts and providing accessible credit risk assessments.

Expert Solution

Step 1

Bad debt is loss to the business and as per conservatism principle we anticpate such losses and provide for them in the form of allownaces for bad and doubtful debt.

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions