Sheffield Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Sheffield's Accounts Receivable account was $599,400 and Allowance for Doubtful Accounts had a credit balance of $44,130. The year-end balance reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below. Days Account Outstanding Less than 16 days Between 16 and 30 days Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days (to be written off) (a) Amount $317,500 117,700 88,200 42,400 18,600 15,000 Probability of Collection 0.96 0.90 0.85 0.78 0.60 0.00 What is the appropriate balance for Allowance for Doubtful Accounts at year-end?

Sheffield Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Sheffield's Accounts Receivable account was $599,400 and Allowance for Doubtful Accounts had a credit balance of $44,130. The year-end balance reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below. Days Account Outstanding Less than 16 days Between 16 and 30 days Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days (to be written off) (a) Amount $317,500 117,700 88,200 42,400 18,600 15,000 Probability of Collection 0.96 0.90 0.85 0.78 0.60 0.00 What is the appropriate balance for Allowance for Doubtful Accounts at year-end?

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter16: Accounting For Accounts Receivable

Section: Chapter Questions

Problem 2CE: Tonis Tech Shop has total credit sales for the year of 170,000 and estimates that 3% of its credit...

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At the end of 20-3, Martel Co. had 410,000 in Accounts Receivable and a credit balance of 300 in Allowance for Doubtful Accounts. Martel has now been in business for three years and wants to base its estimate of uncollectible accounts on its own experience. Assume that Martel Co.s adjusting entry for uncollectible accounts on December 31, 20-2, was a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts of 25,000. (a) Estimate Martels uncollectible accounts percentage based on its actual bad debt experience during the past two years. (b) Prepare the adjusting entry on December 31, 20-3, for Martel Co.s uncollectible accounts.
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