Calculation of Estimated Allowance for doubtful accounts with a change in Sales.
The Draber Company uses the allowance method based on the aging method to determine the estimated allowance for doubtful accounts. Below is presented an aging at the end of the current period with the percent uncollectible experience rates:
|
|
|
Number of Days Outstanding
|
|
|
Total
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0-30 days
|
31-60 days
|
61-90 days
|
91-120 days
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Over 120 days
|
|
Accounts Receivable
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$450,000
|
$220,000
|
$100,000
|
$45,000
|
$30,000
|
$55,000
|
|
%uncollectible rate
|
|
2%
|
4%
|
6%
|
8%
|
10%
|
Assume that the Draber Company uses 4% of total sales to estimate the allowance for doubtful accounts as opposed to the aging of the accounts receivable. What would you answers be for parts 1 and 2 if sales for the current period were $220,000?