Outlaw Bike Co. is a wholesaler of motorcycle supplies. An aging of the company’

Question

Outlaw Bike Co. is a wholesaler of motorcycle supplies. An aging of the company’s accounts receivable on December 31 and a historical analysis of the percentage of uncollectible accounts in each age category are as follows:

Estimate what the proper balance of the Allowance for Doubtful Accounts should be as of December 31.

Estimate what the proper balance of the Allowance for Doubtful Accounts should be as of December 31.

Age Interval Balance Percent Uncollectible Not past due $892,000 3/4 % 1 - 30 days past due 285,000 1 31 - 60 days past due 101,000 8 61 - 90 days past due 63,000 16 91 - 180 days past due 43,100 50 Over 180 days past due 17,700 80 $1,401,800

Explanation / Answer

Estimate what the proper balance of the Allowance for Doubtful Accounts should be as of December 31.

Estimated Uncollectible Accounts Age interval Balance Percent Amount Not past due 892000 0.75 6690 1 - 30 days past due 285000 1.00 2850 31 - 60 days past due 101000 8.00 8080 61 - 90 days past due 63000 16.00 10080 91 - 180 days past due 43100 50.00 21550 Over 180 days past due 17700 80.00 14160 Total 1401800 63410

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