At January 1, 2002, Betty DeRose, Inc. had an allowance for doubtful accounts wi

Question

At January 1, 2002, Betty DeRose, Inc. had an allowance for doubtful accounts with a $3,900 credit balance. During 2002, Betty recovered $2,000 from customers that had been written off in previous years. At December 31, 2002, Betty prepared the following aging schedule:

Accounts Receivable % Uncollectible

not past due $120,000 2%

1-30 days past due 48,000 5%

31-60 days past due 25,000 8%

61-90 days past due ? 12%

over 90 days past due 15,000 25%

Based on the above aging schedule, Betty DeRose estimated its bad debt expense to be $8,610 for 2002. Calculate the net realizable value of Betty's accounts receivable at December 31, 2002. Do not use decimals in your answer.

Explanation / Answer

Thus, Allowance for doubtful accounts for 2002 (excluding debts past 61- 90 days due) = $10550-$3900 = 6650

However, total estimated bad debt expense for 2002 is $ 8610

Hence Allowance for doubtful accounts for debts past 61- 90 days due = $ 8610- $ 6650 = $ 1960

So Accounts Receivable for debts past 61-90 days due = $ 16333

Total Accounts Receivable for 2002 = $ 208000+ $ 16333 = $ 224333

NRV = $ 224333-$ 12510 = $ 211823

Note that $ 2000 which has been recovered shall be accounted in the Income Statement directly as it is already written off in the past.

Accnts receivable uncollectible Doubtful Not past due 120000 2% 2400 1-30 days 48000 5% 2400 31-60 days 25000 8% 2000 61-90 days 12% over 90 days 15000 25% 3750 208000 10550

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