Stine Co. sells Christmas angels. Stine determines that at the end of December, it has the following aging schedule of Accounts Receivable:
| Customer | Total | | Not yet due | | Number of Days Past Due | |
| --------- | ----- | - | ----------- | - | ----------------------- | - |
| | | | 1-30 | 31-60 | 61-90 | Over 90 |
| DV Gannon | $500 | | $300 | $200 | | |
| JJ Joysen | 300 | | 100 | | 200 | |
| NJ Bell | 150 | | | 50 | | 100 |
| JC Werly | 200 | | 200 | | | |
| | ? | | 300 | 250 | 200 | 100 |
| % uncollectible | | | 1% | 5% | 10% | 50% |
| Total Estimated Uncollectible Amounts | ? | | ? | ? | ? | ? |
Answer (2)
The Total Estimated Uncollectible Amounts for Stine Co. is calculated to be $135.00 by summing uncollectible amounts based on the aging schedule and specified percentages. The total Accounts Receivable is $1150. This estimate helps the company anticipate potential losses from unpaid debts.
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Calculate the total amount of Accounts Receivable: 500 + 300 + 150 + 200 = 1150 .
Calculate the uncollectible amount for each aging category by multiplying the amount in each category by the corresponding uncollectible percentage.
Sum the uncollectible amounts for each category: 5.00 + 15.00 + 25.00 + 40.00 + 50.00 = 135.00 .
The Total Estimated Uncollectible Amounts is 135.00 .
Explanation
Understanding the Problem We are given an aging schedule of Accounts Receivable for Stine Co. and need to calculate the Total Estimated Uncollectible Amounts. The schedule provides the amounts due from customers, categorized by how many days past the due date they are, along with the percentage of each category that is estimated to be uncollectible.
Calculating Total Accounts Receivable First, we need to calculate the total amount of Accounts Receivable. This is the sum of the 'Total' column for each customer: DV Gannon, JJ Joysen, NJ Bell, and JC Werly.
Total Accounts Receivable The total amount of Accounts Receivable is: 500 + 300 + 150 + 200 = 1150 So, the total Accounts Receivable is $1150.
Amounts in Each Aging Category Next, we calculate the total amount in each aging category. These values are provided in the table:
Not yet due: $500
1-30 days past due: $300
31-60 days past due: $250
61-90 days past due: $200
Over 90 days past due: $100
Calculating Uncollectible Amounts for Each Category Now, we multiply the total amount in each aging category by the corresponding percentage uncollectible to find the estimated uncollectible amount for each category:
Not yet due: $500 \times 0.01 = $5.00
1-30 days past due: $300 \times 0.05 = $15.00
31-60 days past due: $250 \times 0.10 = $25.00
61-90 days past due: $200 \times 0.20 = $40.00
Over 90 days past due: $100 \times 0.50 = $50.00
Total Estimated Uncollectible Amounts Finally, we sum the uncollectible amounts calculated in the previous step to find the Total Estimated Uncollectible Amounts: 5.00 + 15.00 + 25.00 + 40.00 + 50.00 = 135.00 Therefore, the Total Estimated Uncollectible Amounts is $135.00.
Final Answer The Total Estimated Uncollectible Amounts is $135.00.
Examples
Understanding accounts receivable aging and estimating uncollectible amounts is crucial for businesses to accurately forecast their cash flow and financial health. For example, a small business owner can use this method to assess the risk associated with outstanding invoices and make informed decisions about extending credit to customers. By regularly analyzing the aging of receivables, the owner can identify trends, such as an increase in overdue payments, and take proactive steps to mitigate potential losses. This process helps in maintaining a healthy balance sheet and ensuring the long-term sustainability of the business.
