Oceanside Company uses the balance sheet approach in estimating uncollectible accounts expense. Its Allowance for Doubtful Accounts has a $2,300 credit balance prior to adjusting entries. It has just completed an aging analysis of accounts receivable at December 31, 2018. This analysis disclosed the following information: Age Group Total Percentage considered uncollectiable
Not yet due $56,000 1%
1â30 days past due 30,000 4%
31â60 past due 15,000 6%

Required:
What is the appropriate balance for Oceanside's Allowance for Doubtful Accounts at December 31, 2018?

The appropriate balance for Oceanside's Allowance for Doubtful Accounts at December 31, 2018 is $4,960.

Here, we are to calculate the appropriate balance for Oceanside's Allowance for Doubtful Accounts at December 31, 2018.

Allowance for doubtful debts = (Amount not yet due * Given percentage) + (Past due balance * Given percentage) + (Past due balance * Given percentage)

Allowance for doubtful debts = ($56,000 * 1%) + ($30,000 * 4%) + ($15,000 *  6%)

Allowance for doubtful debts = $560 + $1,200 + $900

Allowance for doubtful debts = $2,660

In the question, we are given a credit balance of $2,300.

Appropriate balance = Allowance for doubtful debts + Credit Balance

Appropriate balance = $2,660 + $2,300

Appropriate balance = $4,960

Therefore, the appropriate balance for Oceanside's Allowance for Doubtful Accounts at December 31, 2018 is $4,960.

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$4,960

Explanation:

The computation of the appropriate balance for  Allowance for Doubtful Accounts but before that first we need to find out the allowance for doubtful debts which are shown below:

= Not yet due × given percentage + past due balance × given percentage + past due balance × given percentage

= $56,000 × 1% + $30,000 × 4% + $15,000 × 6%

= $560 + $1,200 + $900

= $2,660

And, there is a credit balance of $2,300

So, the appropriate balance is

= $2,660 + $2,300

= $4,960

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