Kai Inc. started its business operations on January 1, 2022. Kai Inc. established an allowance for bad debts estimated to be 4% of credit sales. This was after the consideration of the collection experience of the companies in the same industry. As of December 31 2022, the following are the noted balances of accounts related to receivables:
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.
1. How much is the correct outstanding balance of
2. How much is the correct doubtful accounts expense?
a. The recorded allowance for doubtful accounts for the year ended December 31, 2022 is understated by?
b. The net realizable value of accounts receivable as at December 31, 2022 is?
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