Intermediate Accounting, 15th Edition by Kieso, Weygandt, and Warfield Bad-Debt Reporting—Aging - Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in the Allowance for Doubtful Accounts had a credit balance of $40,000 Management has estimated the probability of collection on its year-end receivables as follows: Days Account Outstanding Amount Probability of Collection Less than 16 days $400,000 0.98 Between 16 and 30 days 200,000 0.90 Between 31 and 45 days 85,000 0.85 Between 46 and 60 days 65,000 0.80 Between 61 and 75 days 25,000 0.55 Over 75 days 15,000 0.00 Instructions:

(a) What is the appropriate balance for the Allowance for Doubtful Accounts at the year-end? Days Account Outstanding Amount Probability of Collection Doubtful Accts: 0-15 days $400,000 0.98 Formula 16 - 30 days 200,000 0.90 Formula 31 - 45 days 85,000 0.85 Formula 46 - 60 days 65,000 0.80 Formula 61 - 75 days 25,000 0.55 Formula Over 75 days 15,000 0.00 Formula Formula Enter text answer here.

 (b) Show how Accounts Receivable would be presented on the balance sheet. Account Title Amount Less: Account Title Amount Text Title Formula 

c) What is the dollar effect of the year-end bad debt adjustment on the before-tax income? Enter text answer as desired here. Text Title Amount Text explanation as required. Amount Text Title Formula

Answer rating: 100% (QA)

1 Particulars Less than 16 days Between 16 and 30 days Betwee... View the full answer