[Anonymous]

Here is the aging.

Accounts Receivable Aging Analysis

at December 31, Year 1

Aging Category

Balance

Estimated

Percentage Uncollectible

0 – 30 days

$225,000

1%

31 – 60 days

240,000

9%

61 – 90 days

127,000

23%

over 90 days

85,000

60%

The balance in the allowance for doubtful accounts at January 1, Year 1, was $62,000. The activity in this account during Year 1 consisted of the write-off of accounts valued at $19,000 and a recovery of $4,000 in accounts that were written off in previous years.

The Lambert accounting staff identified the following unrecorded adjustments while performing the year-end review of accounts receivable balances:

· An account receivable for $12,000 that was invoiced in February, Year 1 was deemed uncollectible because the customer was declared bankrupt on November 30, Year 1. The balance has not yet been written off.

· An account receivable for $5,000 that was invoiced in August, Year 1 was collected. However, it was not properly removed from the accounts receivable subsidiary ledger and the aging analysis.

As a result of the change in the Lambert credit policy during Year 1, the CFO believes that the estimated percentage uncollectible for each aging category should be increased by two percentage points.

So when I have to do the 2 above adjustments the answer key says “This will reduce the AR balance in the “over 90 days” aging category due to the ages of these balances” how do you know they both go right to the +90?

[Anonymous]

Because you are at the end of year 1 the invoice from February and bankrupt in November is over 90 days and the invoice that was paid in August is over 90 days. For an Aging Report you look at the invoice date. On 12/31/Year 1 you would put any unrecorded invoice dated prior to October 1 in the +90 Days category and adjust that.

[Author]

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