Math Problem Statement
On December 31, Jarden Company's Allowance for Doubtful Accounts has an unadjusted credit balance of $14,500. Jarden prepares a schedule of its December 31 accounts receivable by age.
Accounts ReceivableAge of Accounts ReceivableExpected Percent Uncollectible
$ 830,000
Not yet due
1.25%
254,000
1 to 30 days past due
2.00
86,000
31 to 60 days past due
6.50
38,000
61 to 90 days past due
32.75
12,000
Over 90 days past due
68.00
Required:
1. Compute the required balance of the Allowance for Doubtful Accounts at December 31 using an aging of accounts receivable.
Solution
To compute the required balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method, follow these steps:
Step 1: Organize the data
The total required balance is computed as the sum of the uncollectible amounts for each age category:
Age of Accounts Receivable | Accounts Receivable | Expected % Uncollectible | Uncollectible Amount |
---|---|---|---|
Not yet due | |||
1 to 30 days past due | |||
31 to 60 days past due | |||
61 to 90 days past due | |||
Over 90 days past due |
Step 2: Add up the uncollectible amounts
Step 3: Interpret the result
The required balance for the Allowance for Doubtful Accounts at December 31 is $41,650.
Let me know if you want help with related calculations or explanations! 😊
Follow-up Questions:
- How would Jarden adjust the Allowance for Doubtful Accounts if the current balance differs from the required balance?
- What journal entry would be needed to adjust the Allowance for Doubtful Accounts to the computed amount?
- How does the aging method compare to the percentage of sales method in estimating doubtful accounts?
- Can you explain the impact of adjusting the Allowance for Doubtful Accounts on the financial statements?
- What strategies might Jarden use to reduce the uncollectible amounts in older categories?
Tip: Always check the current balance of the allowance account to calculate the necessary adjustment!
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Math Problem Analysis
Mathematical Concepts
Accounting
Aging of Accounts Receivable
Percentage Calculations
Formulas
Uncollectible Amount = Accounts Receivable × Expected Percent Uncollectible
Total Required Allowance = Sum of Uncollectible Amounts
Theorems
-
Suitable Grade Level
College/Professional Accounting
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