Oceanside Company uses the balance sheet approach in estimating uncollectible accounts expense. Its Allowance for Doubtful Accounts has a $2,300 credit balance prior to adjusting entries. It has just completed an aging analysis of accounts receivable at December 31, 2018. This analysis disclosed the following information:

Age Group Total Percentage considered uncollectiable
Not yet due $56,000 1%
1â30 days past due 30,000 4%
31â60 past due 15,000 6%

Required:
What is the appropriate balance for Oceanside's Allowance for Doubtful Accounts at December 31, 2018?

The computation of the appropriate balance for Allowance for Doubtful Accounts but before that first we need to find out the allowance for doubtful debts which are shown below:

= Not yet due × given percentage + past due balance × given percentage + past due balance × given percentage

= $56,000 × 1% + $30,000 × 4% + $15,000 × 6%

= $560 + $1,200 + $900

= $2,660

And, there is a credit balance of $2,300

So, the appropriate balance is

= $2,660 + $2,300

= $4,960

Tundexi Tundexi · Answer 2 · 2021-11-30T15:43:23+01:00

The appropriate balance for Oceanside's Allowance for Doubtful Accounts at December 31, 2018 is $4,960.

Here, we are to calculate the appropriate balance for Oceanside's Allowance for Doubtful Accounts at December 31, 2018.

Allowance for doubtful debts = (Amount not yet due * Given percentage) + (Past due balance * Given percentage) + (Past due balance * Given percentage)

Allowance for doubtful debts = ($56,000 * 1%) + ($30,000 * 4%) + ($15,000 * 6%)

Allowance for doubtful debts = $560 + $1,200 + $900

Allowance for doubtful debts = $2,660

In the question, we are given a credit balance of $2,300.

Appropriate balance = Allowance for doubtful debts + Credit Balance

Appropriate balance = $2,660 + $2,300

Appropriate balance = $4,960

Therefore, the appropriate balance for Oceanside's Allowance for Doubtful Accounts at December 31, 2018 is $4,960.

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