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12 August, 01:32

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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  1. 12 August, 01:40
    0
    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
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