Question

On March 31, Vale Co. had an unadjusted credit balance of $1,000 in its allowance for credit losses. An analysis of Vale’s trade accounts receivable at that date revealed the following: Estimated Age Amount Uncollectible 0-30 days $60,000 5% 31-60 days 4,000 10% Over 60 days 2,000 70% What amount should Vale report as allowance for credit losses in its March 31 balance sheet?

Answer 1

Answer:

$4,800

Explanation:

Amount to be reported under the age of 0-30 days:

= Amount × Estimated uncollectible

= $60,000 × 5%

= $3,000

Amount to be reported under the age of 31-60 days:

= Amount × Estimated uncollectible

= $4,000 × 10%

= $400

Amount to be reported under the age of over 60 days:

= Amount × Estimated uncollectible

= $2,000 × 70%

= $1,400

Therefore, the total amount reported is calculated as follows:

= Amount to be reported under the age of 0-30 days + Amount to be reported under the age of 31-60 days + Amount to be reported under the age of over 60 days

= $3,000 + $400 + $1,400

= $4,800