Option #1: Bad Debts
Paisley Corporation operates in an industry that has a high rate of bad debts. The year-end balance reported in the balance sheet for the Allowance for Doubtful Accounts will be based on the aging schedule shown below:
|
Days Account Outstanding |
Amount |
Probability of Not Collecting |
|---|---|---|
|
Less than 16 days |
$351,600 |
.03 |
|
Between 16 and 30 days |
122,400 |
.11 |
|
Between 31 and 45 days |
84,000 |
.17 |
|
Between 46 and 60 days |
66,000 |
.24 |
|
Between 61 and 75 days |
33,600 |
.40 |
|
Over 75 days |
$ 9,600 |
.70 |
Before year-end adjustments, Chatter’s Allowance for Doubtful Accounts had a debit balance of $6,000.
- What is the appropriate balance for the Allowance for Doubtful Accounts at year-end?
- Show how accounts receivable would be presented on the balance sheet.
- What is the dollar effect of the year-end bad debt adjustment on the before-tax income?
Your well-written paper must be 2 to 3 pages in length, in addition to the title and reference pages, and be formatted according to the CSU-Global Guide to Writing and APA Requirements. Cite at least three peer-reviewed sources, in addition to the required readings for this module.
