Determine the following for each case: The amount to be added to Allowance for Doubtful Accounts. The ending balance of the Allowance for Doubtful Accounts. Case (alpha) Credit balance of $700 in the allowance account just prior to adjustment. Using the Analysis of A/R Method indicates doubtful accounts of $8,500. (beta) Credit balance of $800 in the allowance account just prior to adjustment. Uncollectible accounts are estimated at 2% of sales, using the % of Sales Method; and sales totaled $1,000,000 for the year. ANSWERS: Case 1. 2. (alpha) (beta)
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.
- Determine the following for each case:
- The amount to be added to Allowance for Doubtful Accounts.
- The ending balance of the Allowance for Doubtful Accounts.
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Case |
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(alpha) |
Credit balance of $700 in the allowance account just prior to adjustment. Using the Analysis of A/R Method indicates doubtful accounts of $8,500. |
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(beta) |
Credit balance of $800 in the allowance account just prior to adjustment. Uncollectible accounts are estimated at 2% of sales, using the % of Sales Method; and sales totaled $1,000,000 for the year. |
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ANSWERS: |
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