Young and Old Corporation (YOC) uses two aging categories to estimate uncollectible accounts. Accounts less than 60 days are considered young and have a 5% uncollectible rate. Accounts more than 60 days are considered old and have a 40% uncollectible rate. Required:
1.If YOC has $100,000 of young accounts and $400,000 of old accounts, how much should be reported in the Allowance for Doubtful Accounts?
2.If YOC’s Allowance for Doubtful Accounts currently has an unadjusted credit balance of $40,000, how much should be credited to the account?
3.If YOC’s Allowance for Doubtful Accounts has an unadjusted debit balance of $5,000, how much should be credited to the account?

Respuesta :

Answer:

1. $165,000

2. $125,000

3. $170,000

Explanation:

The computation is shown below:

1. Young account $100,000 × 5% = $5,000

Old accounts $400,000 × 40% = $160,000

Allowance for Doubtful Accounts = $165,000

2. The amount which is credited is shown below:

= Allowance for Doubtful Accounts - unadjusted credit balance

= $165,000 - $40,000

= $125,000

3. The amount which is credited is shown below:

= Allowance for Doubtful Accounts + unadjusted debit balance

= $165,000 + $5,000

= $170,000