Exercise 8-4 Month of Sale Balance, March 31 Average Age of Receivables Outstand

Question

Exercise 8-4

Month of Sale

Balance,
March 31

Average Age
of Receivables
Outstanding

Age of Accounts

Estimated Percentage
Uncollectible

Date

Account Titles and Explanation

Debit

Credit

Mar. 31

Exercise 8-4

Menge Company has accounts receivable of $117,300 at March 31.

Month of Sale

Balance,
March 31

Average Age
of Receivables
Outstanding

March $78,700 16 days February 21,200 48 days January 8,600 73 days Prior to January 8,800 110 days 117,300
Credit terms are 2/10, n/30. At March 31, Allowance for Doubtful Accounts has a credit balance of $1,500 prior to adjustment. The company uses the percentage-of-receivables basis for estimating uncollectible accounts. The company's estimate of bad debts is shown below.

Age of Accounts

Estimated Percentage
Uncollectible

1–30 days 4.0% 31–60 days 7.0% 61–90 days 23.0% Over 90 days 52.0%

Explanation / Answer

Total estimated uncollectibles = $11,186

Journal entry to record baddebt expenses

Age of accounts Amount % Estimated uncollectible 0-30 Days $ 78,700 4% $78,700*4% = $3,148 31-60 Days $ 21,200 7% $21,200*7% = $1,484 61-90 Days $    8,600 23% $8,600*23% = $1,978 Over 90 Days $    8,800 52% $8,800*52% = $4,576 $ 11,186

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