Young and Old Corporation (YOC) uses two aging categories to estimate uncollectible accounts. Accounts less than 60 days are considered young and have a 5% uncollectible rate. Accounts more than 60 days are considered old and have a 40% uncollectible rate. Required:

1. If YOC has $100,000 of young accounts and $400,000 of old accounts, how much should be reported in the Allowance for Doubtful Accounts?

2. If YOC's Allowance for Doubtful Accounts currently has an unadjusted credit balance of $40,000, how much should be credited to the account?

3. If YOC's Allowance for Doubtful Accounts has an unadjusted debit balance of $5,000, how much should be credited to the account?

Question

Business

Cruz

17 January, 06:23

Young and Old Corporation (YOC) uses two aging categories to estimate uncollectible accounts. Accounts less than 60 days are considered young and have a 5% uncollectible rate. Accounts more than 60 days are considered old and have a 40% uncollectible rate. Required:

1. If YOC has $100,000 of young accounts and $400,000 of old accounts, how much should be reported in the Allowance for Doubtful Accounts?

2. If YOC's Allowance for Doubtful Accounts currently has an unadjusted credit balance of $40,000, how much should be credited to the account?

3. If YOC's Allowance for Doubtful Accounts has an unadjusted debit balance of $5,000, how much should be credited to the account?

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Answers (1)

Know the Answer?

Cassandra Chandler · Answer 1

1. $165,000

2. $125,000

3. $170,000

Explanation:

The computation is shown below:

1. Young account $100,000 * 5% = $5,000

Old accounts $400,000 * 40% = $160,000

Allowance for Doubtful Accounts = $165,000

2. The amount which is credited is shown below:

= Allowance for Doubtful Accounts - unadjusted credit balance

= $165,000 - $40,000

= $125,000

3. The amount which is credited is shown below:

= Allowance for Doubtful Accounts + unadjusted debit balance

= $165,000 + $5,000

= $170,000