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AGUILA, PAULO TIMOTHY DR. 08/24/21

IV – BSA

PROBLEM 10 – 13 Year
2014 2015 2016 2017
Sales 125,000 180,000 250,000 280,000
Credit Sales 90,000 158,000 210,000 235,000
Collections on accounts receivable
2014 sales 78,000 8,500 200 0
2015 sales 134,000 14,200 300
2016 sales 178,800 19,500
2017 sales 200,000
Accounts receivable written off
2014 accounts 2,500 500 300 0
2015 accounts 4,600 700 400
2016 accounts 6,200 1,000

1) Year
2014 2015 2016 2017
Actual bad debts 3,300 5,700 7,807 16,807
Credit Sales 90,000 158,000 210,000 458,000
Outstanding receivables (year-end) 9,500 19,900 29,500 58,900
Percentage of outstanding receivables 0.3473684211 0.2864321608 0.2646518276 0.2853519341

SOLUTION
2014
Bad debt 2,500+500+300 3300
Outstanding receivables (year-end) 90000-78000-2500 9500
Percentage of outstanding receivables 3300/9500 0.3473684211

2015
Bad debt 4600+700+400 5700
Outstanding receivables (year-end) 9500+158000-8500-13400-500-4600 19,900
Percentage of outstanding receivables 5700/19900 0.2864321608

2016
Bad debts written off (6200+1000)/(1-((300+400)/(3300+5700))) 7807.2289157
Outstanding receivables (year-end) 19900+210000-200-14200-178800-300-700-6200 29,500
Percentage of outstanding receivables 7807/29500 0.2646518276

2017
Bad debts written off 3300+5700+7807 16,807
Outstanding receivables (year-end) 90000+158000+210000 458,000
Percentage of outstanding receivables 9500+19900+29500 58,900

ANSWER #1: Estimated bad debt percentage based on year-end accounts receivable 28.50%

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2) Bad debts estimated as a percentage of year-end accounts receivable

29500+235000-300-19500-400-1000-200000 43300
Bad debt percentage x 0.285
Bad debt expense 12,340.50

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