Question

Finland Inc has the following Accounts Receivable Aging on March 31 Aging BucketCurrent1-90 days91-180 days181-365 days366 days Amount Outstanding300,000180,000100,00050,00015,000 March sales were $320,000 February ending balance in Allowance for Doubtful Accounts was $30,000 Credit Finland uses the Percentage of Receivables Method and a 5% reserve rate. What is the required reserve at the end of March

Answer 1

Answer:

$32,250

Explanation:

Aging Bucket       Amount Outstanding

Current                 300,000

1-90 days              180,000

91-180 days          100,000

181-365 days        50,000

366+ days             15,000

Total                      $645,000

Total accounts receivable at the end of March = $645,000

Percentage uncollectible = 5%

Required reserve at the end of March = Total accounts receivable at the end of March * Percentage uncollectible

Required reserve at the end of March = $645,000*5%

Required reserve at the end of March = $32,250