Performance Bike Co. is a wholesaler of motorcycle supplies. An aging of the company’s accounts receivable on December 31

Performance Bike Co. is a wholesaler of motorcycle supplies. An aging of the company’s accounts receivable on December 31 and a historical analysis of the percentage of uncollectible accounts in each age category are as follows:

Age Interval Balance Percent Uncollectible Not past due $3,250,000 0.8% 1–30 days past due 1,050,000 2.4 31–60 days past due 780,000 7.0 61–90 days past due 320,000 18.0 91–180 days past due 240,000 34.0 Over 180 days past due 150,000 85.0 $5,790,000

Estimate the proper balance of the allowance for doubtful accounts as of December 31.

Answer:

Balance Percent Amount

Not past due$3,250,000 0.8% $ 26,000

1–30 days past due1,050,000 2.4% 25,200  

31–60 days past due780,000 7.0% 54,600

61–90 days past due320,000 18.0% 57,600

91–180 days past due240,000 34.0% 81,600

Over 180 days past due150,000 85.0% 127,500

Total$5,790,000 $372,500