E8-5 Hachey Company has accounts receivable of $95,100 at
March 31, 2007. An analysis of the accounts shows these
amounts.
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Balance, March 31
Month of Sale 2007 2006
March $65,000 $75,000
February 12,600 8,000
December and January 10,100 2,400
November and October 7,400 1,100
$95,100 $86,500
Credit terms are 2/10, n/30. At March 31, 2007, there is a
$2,200 credit balance in Allowance
for Doubtful Accounts prior to adjustment. The company uses
the percentage of
receivables basis for estimating uncollectible accounts. The
companys estimates of bad
debts are as shown on page 402.
Reporting and Analyzing Receivables
Estimated Percentage
Age of Accounts Uncollectible
Current 2%
130 days past due 7
3190 days past due 30
Over 90 days 50
Instructions
(a) Determine the total estimated uncollectibles.
(b) Prepare the adjusting entry at March 31, 2007, to record
bad debts expense.
(c) Discuss the implications of the changes in the aging
schedule from 2006 to 2007.
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