Pachel Corporation reports the following information pertaining to its accounts receivable: Days Past Due
Current 1-30 31-60 61-90 Over 90
$60,000 S40,000 $25,000 $12,000 $2,000
The company’s credit department provided the following estimates regarding the percent of accounts expected to eventually be written off from each category listed above:
Current receivables outstanding 2%
Receivables 1-30 days past due 4
Receivables 31-60 days past due 16
Receivables 61-90 days past due 40
Receivables over 90 days past due 90
The company uses a balance sheet approach to estimate credit losses.
a. Record the company’s uncollectible accounts expense, assuming it has a $1,400 credit balance in its Allowance for Doubtful Accounts prior to making the necessary adjustment.
b. Record the company’s uncollectible accounts expense, assuming it has a $1,600 debit balance in its Allowance for Doubtful Accounts prior to making the necessary adjustment.