Solution-Calculate the estimated doubtful debts under each

Calculate the estimated doubtful debts under each method

Reference no: EM132565481

Question - Geek Tech Solutions is a local business specialising in personal computer systems. Geek Tech has tight credit control policies and because of this has very few bad debts. Due to the COVID19 restrictions, two of its major customers have been forced to close their businesses and are unable to pay their accounts.

The owner of Geek Tech Solutions has decided it may be more appropriate to use the allowance method of accounting for bad debts. After analysing the receivables history, his accountant identified the following aged analysis:

Age of accounts	Total	Estimated Percentage uncollectible
Current	$48,750	0.005%
31 - 60 days	9,450	2
61 - 90 days	6,375	10
91+ days	4,800	25

Alternatively, he advised the owner could instead adopt the percentage of net credit sales method and use 1% as the estimated value. The total credit sales for the year amounted to $550,000.

Required - Calculate the estimated doubtful debts under each method and advise the owner of Geek Tech Solutions which method would be more appropriate for adoption. Round to the nearest dollar.

Reference no: EM132565481

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Calculate the estimated doubtful debts under each method

Reference no: EM132565481

Reference no: EM132565481

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