Public Image, a firm specializing in marketing and publicity ser proach to estimate uncollectible accounts expensc. At year-end an aging of the accounts receiv- able produced the following classification: Not yet due $333,000 1-30 days past due 135,000 31-60 days past due 58,500 61-90 days past due 13,500 Over 90 days past due 22,500 Total $562,500 On the basis of past experience, the company estimated the percentages probably uncollectible for the above five age groups to be as follows: Group I, 1%; Group 2, 3%; Group 3, 10%; Group 4. 20%; and Group 5, 50%. The Allowance for Doubtful Accounts before adjustment at December 31 showed a credit bal- ance of $8,100. Instructions a Compute the estimated amount of uncollectible accounts based on the above classification by age groups. 6. Prepare the adjusting entry needed to bring the Allowance for Doubtful Accounts to the proper amount. C. Assume that on January 10 of the following year. Public Image learned that an account re- ceivable that had originated on September 1 in the amount of S8,550 was worthless because of the bankruptcy of the customer, Cranston Manufacturing. Prepare the journal entry required on January 10 to write off this account. d. The company is considering the adoption of a policy whereby customers whose outstanding accounts become more than 60 days past due will be required to sign an interest-bearing note for the full amount of their outstanding balance. What advantages would such a policy offer
Public Image, a firm specializing in marketing and publicity ser proach to estimate uncollectible accounts expensc. At year-end an aging of the accounts receiv- able produced the following classification: Not yet due $333,000 1-30 days past due 135,000 31-60 days past due 58,500 61-90 days past due 13,500 Over 90 days past due 22,500 Total $562,500 On the basis of past experience, the company estimated the percentages probably uncollectible for the above five age groups to be as follows: Group I, 1%; Group 2, 3%; Group 3, 10%; Group 4. 20%; and Group 5, 50%. The Allowance for Doubtful Accounts before adjustment at December 31 showed a credit bal- ance of $8,100. Instructions a Compute the estimated amount of uncollectible accounts based on the above classification by age groups. 6. Prepare the adjusting entry needed to bring the Allowance for Doubtful Accounts to the proper amount. C. Assume that on January 10 of the following year. Public Image learned that an account re- ceivable that had originated on September 1 in the amount of S8,550 was worthless because of the bankruptcy of the customer, Cranston Manufacturing. Prepare the journal entry required on January 10 to write off this account. d. The company is considering the adoption of a policy whereby customers whose outstanding accounts become more than 60 days past due will be required to sign an interest-bearing note for the full amount of their outstanding balance. What advantages would such a policy offer
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter16: Accounting For Accounts Receivable
Section: Chapter Questions
Problem 3CP: At the end of 20-3, Martel Co. had 410,000 in Accounts Receivable and a credit balance of 300 in...
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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:Renta
Public Image, a firm specializing in marketing and publicity services, uses the balance sheet ap-
proach to estimate uncollectible accounts expensc. At year-end an aging of the accounts receiv- Aging Accounts
able produced the following classification:
PROBLEM 7.5
Receivable; Write-offs
LO 5
Not yet due
1-30 days past due
$333,000
135,000
31-60 days past due
58,500
61-90 days past due
13,500
Over 90 days past due
22,500
Total
$562,500
On the basis of past experience, the company estimated the percentages probably uncollectible
for the above five age groups to be as follows: Group I, 1%; Group 2, 3%; Group 3, 10%; Group 4,
20%; and Group 5, 50%.
The Allowance for Doubtful Accounts before adjustment at December 31 showed a credit bal-
ance of $8,100.
Instructions
& Compute the estimated amount of uncollectible accounts based on the above classification by
age groups.
6. Prepare the adjusting entry needed to bring the Allowance for Doubtful Accounts to the proper
amount.
C. Assume that on January 10 of the following year. Public Image learned that an account re-
ceivable that had originated on September 1 in the amount of $8,550 was worthlcss because
of the bankruptcy of the customer, Cranston Manufacturing. Prepare the journal entry required
on January 10 to write off this account.
d. The company is considering the adoption of a policy whereby customers whose outstanding
accounts become more than 60 days past due will be required to sign an interest-bearing not
for the full amount of their outstanding balance. What advantages would such a policy oferi
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