Question

Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.

1. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method

Short answer

The aging of accounts receivables methodis the type of accounting technique used by thefinance departmentto calculatethe amount of doubtful debt by classifying thedebtors according to their age days.

Step-by-step solution

Introduction

The allowance for doubtful accounts for each day past due will be calculated by multiplying the relevant uncollectible rate by the amount of accounts receivables.

Estimation of allowance for doubtful accounts using the aging of accounts receivable method

Particulars	0	1 to 30	31 to 60	61 to 90	Over 90
Accounts receivables	$396,000	$90,000	$36,000	$18,000	$30,000
Multiply: Percent uncollectible	1%	2%	5%	7%	10%
Allowance for doubtful accounts	$3,960	$1,800	$1,800	$1,260	$3,000