Maxwell Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: % Considered Age Group 0-30 days past due Balance Uncollectible $300,000 19% 31-60 days past due 54,000 3% 61-120 days past due 60,000 6% 121-180 days past due 21,000 10% Over 180 days past due 6,000 20% $441,000 The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $2,520 on December 31, before any adjustments. a. Determine the amount of the adjustment for estimated credit losses on December 31. b. Determine the financial statement effect of a write off of Porter Company's account on the following May 12, in the amount of $1,440. Use negative signs with answers, when appropriate. If a transaction increases and decreases the same Balance Sheet category, enter the increase amount in the first row and the decrease amount directly below (in the second row). Balance Sheet Income Statement Stockholders' = Liabilities - Expenses - Net Income Assets + Equity Revenues
Maxwell Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: % Considered Age Group 0-30 days past due Balance Uncollectible $300,000 19% 31-60 days past due 54,000 3% 61-120 days past due 60,000 6% 121-180 days past due 21,000 10% Over 180 days past due 6,000 20% $441,000 The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $2,520 on December 31, before any adjustments. a. Determine the amount of the adjustment for estimated credit losses on December 31. b. Determine the financial statement effect of a write off of Porter Company's account on the following May 12, in the amount of $1,440. Use negative signs with answers, when appropriate. If a transaction increases and decreases the same Balance Sheet category, enter the increase amount in the first row and the decrease amount directly below (in the second row). Balance Sheet Income Statement Stockholders' = Liabilities - Expenses - Net Income Assets + Equity Revenues
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter8: Revenue Recognition, Receivables, And Advances From Customers
Section: Chapter Questions
Problem 25E
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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.
Question
Transcribed Image Text:Maxwell Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible:
% Considered
Age Group
Balance Uncollectible
0-30 days past due
$300,000
1%
31-60 days past due
54,000
3%
61-120 days past due
60,000
6%
121-180 days past due
21,000
10%
Over 180 days past due
6,000
20%
$441,000
The company handles credit losses using the allowance method.
The credit balance of the Allowance for Doubtful Accounts is $2,520 on December 31, before any adjustments.
a. Determine the amount of the adjustment for estimated credit losses on December 31.
b. Determine the financial statement effect of a write off of Porter Company's account on the following May 12, in the amount of $1,440.
Use negative signs with answers, when appropriate.
If a transaction increases and decreases the same Balance Sheet category, enter the increase amount in the first row and the decrease amount directly below (in the second row).
Balance Sheet
Income Statement
Stockholders'
Assets
Liabilities
Equity
Revenues
Expenses
= Net Income
+
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