M. Beall Inc. uses the aging method to estimate the company’s bad debt expense. Mike Beall, the president of the company, collected information about the company’s outstanding accounts receivable and their probability of collection:

Calculate the allowance for uncollectible accounts for M. Beall, Inc., the total balance in accounts receivable, and the net realizable value of the company’s accounts receivable. Assume that M. Beall Inc. adopts a policy of writing off as worthless all unpaid accounts receivable over 120 days old. How will implementation of this policy impact the net realizable value of the company’s accounts receivable? Why?

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Account Age 0-30 days. 31-60 days. Amount Probability of Non-Collection $725,000 0.5% 275,000 1.5 61-90 days. 170,000 2.5 91-120 days. 100,000 4.0 Over 120 days 40,000 20.0