Week 2 Individual Assignment - Essay Example

a 30) 65000 x .07 = 4550 (31-90) (12,600 + 10100) x .30 = 6810 (90 7400) x .5 = 3700 The total of uncollectible accounts as of March 31, 2009 based on the policy of implementing an aging schedule is $15,060b) The balance of allowance for uncollectible accounts was $2,200. The company grossly underestimated the bad debt expense of the firm. The pertinent journal entries are below.Bad debt expense 2200 Allowance for doubtful accounts 2200Bad debt expense 12860 Account Receivables 12860c) The implication of the change to an aging schedule in 2007 help the company realize that it is having problems with its collection of account receivables.

The loses associated with bad debt were 7 times higher than what the old system was able to estimate. The new system which utilizes an aging schedule will help the company in the long term. Those delinquent customers should never again receive credit from the company. Changes should be made to the 2/10 , n/30 policy. The company has to make changes to ensure this pattern does not continue in the future. Some of the alternatives the company has include increasing the 2% discount incentive to 3%.

This will motivate more customers to pay early.