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Financial & Managerial Accounting
Found in: Page 350
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Hovak Company has credit sales of $4,500,000 for year 2017. At December 31, 2017, the company’s Allowance for Doubtful Accounts has an unadjusted debit balance of $3,400. Hovak prepares a schedule of its December 31, 2017, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here.

Required 1. Compute the required balance of the Allowance for Doubtful Accounts at December 31, 2017, using the aging of accounts receivable method

Answer

The amount of total allowance for doubtful accounts will be $27,990.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Introduction to topic

The allowance for doubtful accounts is ascertained by using the amount of accounts receivables and the expected percentage of uncollectible by the firm.

Step 2: Computation of the required balance of the allowance for doubtful accounts

Age

Amount($)

Percentage

Allowance for doubtful accounts($)

Not yet due

396,400

2.0%

7,928

1 to 30 days

277,800

4.0%

11,112

31 to 60 days

48,000

8.50%

4,080

61 to 90 days

6,600

39.0%

2,574

Over 90 days

2,800

82.0%

2,296

Total

$27,990

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