Rigney Inc. uses the allowance method to estimate uncollectible accounts receivable. The company produced the following aging of the account

Rigney Inc. uses the allowance method to estimate uncollectible accounts receivable. The company produced the following aging of the accounts receivable at year-end.

Number of Days Outstanding
Total 0–30 31–60 61–90 91–120 Over 120
Accounts receivable 200,000 77,000 46,000 39,000 23,000 $15,000
% uncollectible 1% 4% 5% 8% 20%

Calculate the total estimated bad debts based on the above information.

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  1. Answer:

    Total estimated bad debts = $9,400

    Explanation:

    days outstanding     A/c Receivable    %        estimate

    0-30                           $77,000              1           $770

    31-60                          $46,000              4         $1,840

    61-90                           $39,000              5        $1,950

    91-120                          $23,000              8         $1,840

    over 120                      $15,000               20       $3,000

    Total                            200,000                          $9,400                      

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  2. Answer:

    $9,400

    Explanation:

    Account receivable,%Uncollectible,Estimated Bad debt

    A B C

    0–30 $77,000 × 1% = $770

    31–60 $46,000 ×4%=$ 1,840

    61–90 $39,000 × 5%=$ 1,950

    91–120 $23,000 ×8%=$1,840

    Over 120 $15,000 ×20%= $3,000

    TOTAL $200,000=$ 9,400

    The total estimated bad debts based on the information given is $9,400

    Note:

    Account receivable is A

    % Uncollectible is B

    Estimated Bad debt is C

    Estimated bad debt is A× percentage of B= C

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