The Physical Therapy Center specializes in helping patients regain motor skills after serious accidents. The center has the following balances on December 31, 2021, before any adjustment: Accounts Receivable = $110,000; Allowance for Uncollectible Accounts = $4,000 (debit). The center estimates uncollectible accounts based on an aging of accounts receivable as shown below. Age Group AmountReceivable Estimated PercentUncollectible Not yet due $ 60,000 4% 0 – 60 days past due 26,000 20% 61–120 days past due 16,000 30% More than 120 days past due 8,000 85% Total $110,000 Required: 1. Estimate the amount of uncollectible receivables. 2. Record the adjustment for uncollectible accounts on December 31, 2021. 3. Calculate net accounts receivable.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
The Physical Therapy Center specializes in helping patients regain motor skills after serious accidents. The center has the following balances on December 31, 2021, before any adjustment:
| Age Group | Amount Receivable |
Estimated Percent Uncollectible |
| Not yet due | $ 60,000 | 4% |
| 0 – 60 days past due | 26,000 | 20% |
| 61–120 days past due | 16,000 | 30% |
| More than 120 days past due | 8,000 | 85% |
| Total | $110,000 |
Required:
1. Estimate the amount of uncollectible receivables.
2. Record the adjustment for uncollectible accounts on December 31, 2021.
3. Calculate net accounts receivable.
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