Rough Stuff is a distributor of large rocks. It sells on credit to commercial landscaping companies and
Question:
Rough Stuff is a distributor of large rocks. It sells on credit to commercial landscaping companies and extends terms that require customers to pay in 60 days. For accounts that arc not overdue, Rough Stuff has found that there is a 90% probability of collection. For accounts up to one month past due, the likelihood of collection decreases to 75%. If accounts are between one and two months past due, the probability of collection is 65%, and if an account is over two months past due, Rough Stuff estimates only a 25% chance of collecting the receivable.
On December 31, 2016, the credit balance in Allowance for Doubtful Accounts is $34,590. The amounts of gross receivables, by age, on this date are as follows:
Required
1. Prepare a schedule to estimate the amount of uncollectible accounts at December 31, 2016.
2. Rough Stuff knows that $40,000 of the $45,000 amount that is more than two months overdue is due from one customer that is in severe financial trouble. It is rumored that the customer will be filing for bankruptcy in the near future. As controller for Rough Stuff, how would you handle this situation?
3. Show how accounts receivable would he presented on the December 31, 2016, balance sheet.
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Step by Step Answer:
Financial Accounting The Impact On Decision Makers
ISBN: 9781305793194
10th Edition
Authors: Gary A. Porter, Curtis L. Norton