Hachey Company has accounts receivable of $95,100 at March 31, 2007. An analysis of the accounts shows these amounts.
|
Balance, March 31 |
||
|
Month of Sale |
2007 |
2006 |
|
March |
$65,000 |
$75,000 |
|
February |
12,600 |
8,000 |
|
December and January |
10,100 |
2,400 |
|
November and October |
7,400 |
1,100 |
|
$95,100 |
$86,500 |
Credit terms are 2/10, n/30. At March 31, 2007, there is a $2,200 credit balance in Allowance for Doubtful Accounts prior to adjustments. The company uses the percentage of receivables basis for estimating uncollectible accounts.
Estimated Percentage
|
Age of Accounts |
Uncollectible |
|
Current |
2% |
|
1–30 days past due |
7 |
|
31–90 days past due |
30 |
|
Over 90 days |
50 |
Instructions:
1. Determine the total estimated uncollectibles.
2. Prepare the adjusting entry at March 31, 2007, to record bad debts expense.
3. Discuss the implications of the changes in the aging schedule from 2006 to 2007.