Allowance Method for Doubtful Accounts Averys All-Natural Company supplies wigs and hair care products to beauty salons throughout Texas and the Southwest. The accounts receivable clerk for Averys All-Natural prepared the following aging-of-receivables schedule as of the end of business on December 31, 20Y7: Days Past Due Customer Balance Not Past Due 1–30 31–60 61–90 91–120 Over 120 AAA Beauty 27,500 27,500 Amelia's Wigs 3,750 3,750 Zim’s Beauty 1,650 1,650 Totals 1,100,000 750,000 180,000 75,000 45,000 22,000 28,000 Averys All-Natural Company has a past history of uncollectible accounts by age category, as follows: Age Class Percent Uncollectible Not past due 1 % 1–30 days past due 3 31–60 days past due 7 61–90 days past due 16 91–120 days past due 40 Over 120 days past due 90 4. Assume that on March 4, 20Y8, Averys All-Natural wrote off the $2,950 account of Superior Images as uncollectible. Illustrate the effect on the accounts and financial statements of the write-off of the Superior Images account. If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Statement of Cash Flows Balance Sheet Assets = Liabilities + Stockholders' Equity - = + 20Y8 Mar. 4 fill in the blank 30 fill in the blank 31 fill in the blank 32 fill in the blank 33 Statement of Cash Flows Income Statement fill in the blank 35 fill in the blank 37 5. Assume that on August 17, 20Y8, Superior Images paid $2,950 on its account. Illustrate the effect on the accounts and financial statements of reinstating and collecting the Superior Images account. (a) Reinstatement If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Statement of Cash Flows Balance Sheet Assets = Liabilities + Stockholders' Equity - = + 20Y8 Aug. 17 fill in the blank 42 fill in the blank 43 fill in the blank 44 fill in the blank 45 Statement of Cash Flows Income Statement fill in the blank 47 fill in the blank 49 (b) Collection If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Statement of Cash Flows Balance Sheet Assets = Liabilities + Stockholders' Equity + = + 20Y8 Aug. 17 fill in the blank 54 fill in the blank 55 fill in the blank 56 fill in the blank 57 Statement of Cash Flows Income Statement fill in the blank 59 fill in the blank 61
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Allowance Method for Doubtful Accounts
Averys All-Natural Company supplies wigs and hair care products to beauty salons throughout Texas and the Southwest. The
| Days Past Due | |||||||||
| Customer | Balance | Not Past Due |
1–30 | 31–60 | 61–90 | 91–120 | Over 120 | ||
| AAA Beauty | 27,500 | 27,500 | |||||||
| Amelia's Wigs | 3,750 | 3,750 | |||||||
| Zim’s Beauty | 1,650 | 1,650 | |||||||
| Totals | 1,100,000 | 750,000 | 180,000 | 75,000 | 45,000 | 22,000 | 28,000 |
Averys All-Natural Company has a past history of uncollectible accounts by age category, as follows:
| Age Class | Percent Uncollectible |
||
| Not past due | 1 | % | |
| 1–30 days past due | 3 | ||
| 31–60 days past due | 7 | ||
| 61–90 days past due | 16 | ||
| 91–120 days past due | 40 | ||
| Over 120 days past due | 90 |
4. Assume that on March 4, 20Y8, Averys All-Natural wrote off the $2,950 account of Superior Images as uncollectible. Illustrate the effect on the accounts and financial statements of the write-off of the Superior Images account.
If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and
|
5. Assume that on August 17, 20Y8, Superior Images paid $2,950 on its account. Illustrate the effect on the accounts and financial statements of reinstating and collecting the Superior Images account.
(a) Reinstatement
If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.
|
(b) Collection
If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.
|
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