Rigney Inc. uses the allowance method to estimate uncollectible accounts receivable. The company produced the following aging of the accounts receivable at year-end.

Number of Days Outstanding
Total 0–30 31–60 61–90 91–120 Over 120
Accounts receivable 200,000 77,000 46,000 39,000 23,000 $15,000
% uncollectible 1% 4% 5% 8% 20%

Calculate the total estimated bad debts based on the above information.

Total estimated bad debts = $9,400

Explanation:

days outstanding     A/c Receivable    %        estimate

0-30                           $77,000              1           $770

31-60                          $46,000              4         $1,840

61-90                           $39,000              5        $1,950

91-120                          $23,000              8         $1,840

over 120                      $15,000               20       $3,000

Total                            200,000                          $9,400                      

$9,400

Explanation:

Account receivable,%Uncollectible,Estimated Bad debt

A B C

0–30 $77,000 × 1% = $770

31–60 $46,000 ×4%=$ 1,840

61–90 $39,000 × 5%=$ 1,950

91–120 $23,000 ×8%=$1,840

Over 120 $15,000 ×20%= $3,000

TOTAL $200,000=$ 9,400

The total estimated bad debts based on the information given is $9,400

Note:

Account receivable is A

% Uncollectible is B

Estimated Bad debt is C

Estimated bad debt is A× percentage of B= C