Question

Jarden Company has credit sales of \(3,600,000 for year 2017. On December 31, 2017, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of \)14,500. Jarden prepares a schedule of its December 31, 2017, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here.

Required:

1. Estimate the required balance of the Allowance for Doubtful Accounts at December 31, 2017, using the aging of accounts receivable method.

Short answer

Answer

The total required balance of the allowance for doubtful accounts at the end of December 31, 2017, will be $41,650.

Step-by-step solution

Step-by-Step SolutionStep 1: Introduction to topic

According to the aging of accounts receivable method, the allowance for doubtful accounts will be calculated by multiplying the amount with the age percentage below.

Estimation of balance in allowance for doubtful accounts

Age	Amount($)	Percentage	Allowance for doubtful accounts($)
Not yet due	830,000	1.25%	10,375
1 to 30 days	254,000	2%	5,080
31 to 60 days	86,000	6.50%	5,590
61 to 90 days	38,000	32.75%	12,445
Over 90 days	12,000	68%	8,160
		Total	$41,650