Question: Fossella Fashions uses the accounts receivable aging method to estimate

Fossella Fashions uses the accounts receivable aging method to estimate uncollectible accounts. On February 1, 2010, the balance of the Accounts Receivable account was a debit of $442,341, and the balance of Allowance for Uncollectible Accounts was a credit of $43,700. During the year, the store had sales on account of $3,722,000, sales returns and allowances of $60,000, worthless accounts written off of $44,300, and collections from customers of $3,211,000. As part of the end-of-year (January 31, 2011) procedures, an aging analysis of accounts receivable is prepared. The analysis, which is partially complete, is as follows:

To finish the analysis, the following accounts need to be classified:

From past experience, the company has found that the following rates are realistic for estimating uncollectible accounts:
Percentage Considered
Time Uncollectible
Not yet due 2
1–30 days past due 5
31–60 days past due 15
61–90 days past due 25
Over 90 days past due 50

1. Complete the aging analysis of accounts receivable.
2. Compute the end-of-year balances (before adjustments) of Accounts Receivable and Allowance for Uncollectible Accounts.
3. Prepare an analysis computing the estimated uncollectible accounts.
4. How much is Fossella Fashions’ estimated uncollectible accounts expense for the year?
5. What role do estimates play in applying the aging analysis? What factors might affect these estimates?

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