Ch.6 Q8 - Correct answers PDF

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10/29/2020

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[The following information applies to the questions displayed below.] Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectibility is (a) 5 percent, ( b) 9 percent, and ( c) 34 percent, respectively.  At December 31, 2019 (end of the current accounting year), the Accounts Receivable balance was $50,600 and the Allowance for Doubtful Accounts balance was $1,090 (credit). In determining which accounts have been paid, the company applies collections to the oldest sales first. To simplify, only five customer accounts are used; the details of each on December 31, 2019, follow:  Date 03/11/2018 06/30/2018 01/31/2019

B. Brown—Account Receivable Explanation Debit Sale 13,500 Collection  Collection 

Date 02/28/2019 04/15/2019 11/30/2019

D. Donalds—Account Receivable Explanation Debit Credit Sale 22,300 Collection  7,700 Collection  4,100

Date 11/30/2019 12/15/2019

N. Napier—Account Receivable Explanation Debit Sale 8,500 Collection 

Date 03/02/2017 04/15/2017 09/01/2018 10/15/2018 02/01/2019 03/01/2019 12/31/2019

S. Strothers—Account Receivable Explanation Debit Sale 5,400 Collection  Sale 9,800 Collection  Sale 22,300 Collection  Sale 2,000

Date 12/30/2019

T. Thomas—Account Receivable Explanation Debit Sale 4,000

Credit  3,800 4,200

Balance 13,500 9,700 5,500



 

Balance 22,300 14,600 10,500



 Credit  1,300

Balance 8,500 7,200



 Credit



Balance 5,400 0 9,800 5,400 27,700 21,400 23,400



Balance 4,000

 5,400  4,400  6,300



 Credit



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10/29/2020

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Amount Not yet due

$

13,200

Up to one year past due

$

31,900

More than one year past due

$

5,500

$

50,600

Total accounts receivable

F

 Explanation: 1. Aging Analysis of Accounts Receivable Customer B. Brown D. Donalds N. Napier S. Strothers T. Thomas Totals

Total Receivables $ 5,500 10,500 7,200 23,400 4,000 $ 50,600

(a) Not Yet Due

(b) Up to One Year Past Due

(c) More Than One Year Past Due $ 5,500

$ 10,500 $

$

7,200 2,000 4,000 13,200

21,400 $ 31,900

$

5,500



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5/5...