Allowance method: analysis of receivables. At a January 2002 meeting, the president of Sonic Sound directed the sales staff %u201Cto move some product this year.%u201D The president noted that the credit evaluation department was being disbanded because it had restricted the company%u2019s growth. Credit decisions would now be made by the sales staff.
By the end of the year, Sonic had generated significant gains in sales, and the president was very pleased. The following data were provided by the accounting department:
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20X2
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20X1
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Sales
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$23,987,000
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$8,423,000
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|
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Accounts Receivable, 12/31
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12,444,000
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1,056,000
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|
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Allowance for Uncollectible Accounts, 12/31
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?
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23,000 cr.
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|
|
|
|
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The $12,444,000 receivables balance was aged as follows:
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Age of Receivable
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Amount
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Percentage of Accounts Expected to Be Collected
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Under 31 days
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$5,321,000
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99%
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|
31260 days
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3,890,000
|
90
|
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61290 days
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1,067,000
|
80
|
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Over 90 days
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2,166,000
|
60
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