Jamison Corporation operates in an industry that has a high rate of bad debts. Before any year- 3 end adjustments, the balance in Jamison's Accounts Receivable account was $556,000 and A Allowance for Doubtful Accounts had a debit balance of $40,000. The year-end balance reported sin the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below. 

 

(a) What is the appropriate balance for Allowance for Doubtful Accounts at year-end?

(b) Show how accounts receivable would be presented on the balance sheet

(c) What is the dollar effect of the year-end bad debt adjustment on the before-tax income? r

Transcribed Image Text:

Days Account Outstanding Less than 16 days Between 16 and 30 days Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days (to be written off) Amount $ 300,000 100,000 80.000 40,000 20,000 15,000 Probability of Collection 0.98 0.92 0.86 0.82 0.57 0 Days Account Outstanding Less than 16 days Between 16 and 30 days Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days (to be written off) Amount $ 300,000 100,000 80.000 40,000 20,000 15,000 Probability of Collection 0.98 0.92 0.86 0.82 0.57 0

Answer rating: 100% (QA)

Solution a Calculation of allowance for Doubtful accounts at the end of the year Days Account Outsta... View the full answer