P9-4A (a-d)
Wall Inc. uses the allowance method to estimate uncollectible accounts receivable. The company produced the following aging of the accounts receivable at year end.
Number of Days Outstanding
Total
0-30
31-60
61-90
91-120
Over 120
Accounts receivable $200,000 $77,000 $46,000 $39,000 $23,000 $15,000
% uncollectible 2% 5% 8% 10% 15%
To calculate the estimated uncollectible accounts receivable using the allowance method, you need to multiply the balance in each aging category by the corresponding percentage of uncollectible accounts.
In this case, you have the following aging categories and their corresponding percentages of uncollectible accounts:
- 0-30 days: 2%
- 31-60 days: 5%
- 61-90 days: 8%
- 91-120 days: 10%
- Over 120 days: 15%
Now, let's calculate the estimated uncollectible amount for each aging category:
1. For the 0-30 days aging category:
Multiply the balance of $77,000 by 2%:
$77,000 * 2% = $1,540
2. For the 31-60 days aging category:
Multiply the balance of $46,000 by 5%:
$46,000 * 5% = $2,300
3. For the 61-90 days aging category:
Multiply the balance of $39,000 by 8%:
$39,000 * 8% = $3,120
4. For the 91-120 days aging category:
Multiply the balance of $23,000 by 10%:
$23,000 * 10% = $2,300
5. For the over 120 days aging category:
Multiply the balance of $15,000 by 15%:
$15,000 * 15% = $2,250
Now, you can add up the estimated uncollectible amounts from each aging category to get the total estimated uncollectible accounts receivable:
$1,540 + $2,300 + $3,120 + $2,300 + $2,250 = $11,510