16-17 A study of accounts receivable at the A& Department Store indicates that bills are either current, one month overdue, two months overdue, written off as bad debts, or paid in full. Of those that are current, 80% are paid that month, and the rest become one month overdue. Of the one month overdue bills, 90% are paid, and the rest become two months overdue. 'Those that are [no months overdue still either be paid (85%) or be listed as bad debts. If the sales each month average $150,000, determine how much the company expects to receive of this amount. How much will become bad debts?

Current
80% paid in the month = 80% x $150,000 = $120,000
Remaining = $150,000 - $ 120,000 = $30,000 - 0ne month overdue
90% of $30,000 =$27,000 paid
Remaining = $30,000 - $27,000 = $3,000- Two months overdue
85% of $3,000 = $2,550 paid
Bad debts= $3,000 - $2,550 = $450

Amount received = $120,000 (same month) + $27,000 (1 month) + $2,550 (2 month) = $149,550
Bad debt= $450