Dillsburg Company Sells on Credit with Terms of N/30

Essay

Dillsburg Company sells on credit with terms of n/30. For the $800,000 of accounts at the end of the year 2017 that are not overdue, there is a 92% probability of collection. For the $300,000 of accounts that are less than a month past due, Dillsburg estimates the likelihood of collection going down to 75%. The probability of collecting the $150,000 of accounts more than a month past due is estimated to be 30%.

Required
1. Prepare an aging schedule to estimate the amount of uncollectible accounts.
2. On the basis of the schedule in (1), analyze the impact of the adjustment as of December 31, 2017, to estimate bad debts. Assume that the credit balance in Allowance for Doubtful Accounts is $30,000.