Your company has outstanding invoices totaling $125,000. Current aging shows: 0-30 days ($75,000), 31-60 days ($30,000), 61-90 days ($15,000), over 90 days ($5,000). What percentage of receivables is over 60 days old?
Correct Answer
A) 16%
Receivables over 60 days = $15,000 (61-90 days) + $5,000 (over 90 days) = $20,000. Percentage = $20,000 ÷ $125,000 = 16%.
Why This Is the Correct Answer
To find the percentage of receivables over 60 days old, we identify amounts in the 61-90 days category ($15,000) and over 90 days category ($5,000). These total $20,000. Dividing by total outstanding invoices: $20,000 ÷ $125,000 = 0.16 or 16%. This correctly represents the portion of accounts receivable that are significantly past due and require immediate collection attention.
Why the Other Options Are Wrong
Option B: 20%
20% would result from incorrectly including the 31-60 days category ($30,000) in the calculation. This gives ($30,000 + $15,000 + $5,000) ÷ $125,000 = 40%, or mistakenly calculating $25,000 ÷ $125,000. The question specifically asks for receivables over 60 days, not over 30 days.
Option C: 12%
12% results from only including the 61-90 days amount ($15,000) and forgetting the over 90 days amount ($5,000). This gives $15,000 ÷ $125,000 = 12%. This incomplete calculation misses the most delinquent accounts and understates the true aging problem.
Option D: 24%
24% likely comes from calculation errors or misreading the aging categories. This percentage doesn't correspond to any logical combination of the given aging amounts when divided by the total receivables of $125,000. It may result from confusing percentages or using wrong denominators.
Memory Technique
Remember 'Over 60 = 61+ PLUS 90+' - when calculating aging over a threshold, include ALL categories above that number, not just the next bracket.
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