Renegade Co. is a wholesaler of motorcycle supplies. Anaging of the company’s ac
ID: 2457618 • Letter: R
Question
Renegade Co. is a wholesaler of motorcycle supplies. Anaging of the company’s accounts receivable on December 31,2008, and a historical analysis of the percentage of uncollectibleaccounts in each age category are as follows:
AgeInterval Balance Percent Uncollectible
Not pastdue $400,000 1%
1-30 days pasdue 80,000 2
31-60 days pastdue 18,000 5
61-90 days pastdue 12,500 10
91-180 days pastdue 6,000 70
Over 180 days pastdue 2,500 90
$519,000
Estimate what the proper balance of the allowance fordoubtful accounts should be as of December 31, 2008.
Explanation / Answer
Ageinterval Balance %uncollectible Allowance for uncollectible (Balance x uncollectible %) Not pastdue 400,000 1% 4,000 1-30 days pastdue 80,000 2% 1,600 31-60 days pastdue 18,000 5% 900 61-90 days pastdue 12,500 10% 1,250 91-180 days pastdue 6,000 70% 4,200 over 180 days pastdue 2,500 90% 2,250 14,200