EX 9-11 Estimating doubtful accounts

Imperial Bikes Co. is a wholesaler of motorcycle supplies. An aging of the company’s
accounts receivable on December 31, 2012, 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                    $600,000                                       ¼%
1–30 days past due           120,000                                         2
31–60 days past due          60,000                                          3
61–90 days past due          45,000                                         10
91–180 days past due        26,000                                         40
Over 180 days past due     24,000                                         75
                                        $875,000
Estimate what the proper balance of the allowance for doubtful accounts should be
as of December 31, 2012.

Answer:
                                                                                                Estimated    
                                                                                      Uncollectible Accounts  
                       Age Interval            Balance                 Percent              Amount
Not past due .................................$600,000                  ¼%                  $ 1,500
1–30 days past due ........................120,000                    2                        2,400
31–60 days past due ...................... 60,000                     3                        1,800
61–90 days past due .....................  45,000                    10                       4,500
91–180 days past due ...................... 26,000                  40                     10,400
Over 180 days past due................... 24,000                   75                     18,000
Total............................................ $875,000                                          $38,600

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