The account balances of Wildhorse Company at December 31, 2017, the end of the current year, show Accounts Receivable $169,200; Allowance for Doubtful Accounts $2,068 (credit); Sales $1,334,800; Sales Returns and Allowances $47,000; and Sales Discounts $18,800. Wildhorse has a no cash policy. All sales were made on credit. Instructions: a) Record the adjusting entry at December 31, 2017, assuming bad debts are estimated to be (1) 10% of accounts receivable, and (2) 1.50% of net credit sales. b) Calculate the net realizable value of the accounts receivable for each approach to estimating uncollectible accounts above. c) Assume instead that the Allowance for Doubtful Accounts had a debit balance of $2,444 at December 31, 2017. What is the revised bad debt expense for 2017 and what is the net realizable value of the accounts receivable at December 31, 2017?
The account balances of Wildhorse Company at December 31, 2017, the end of the current year, show Accounts Receivable $169,200; Allowance for Doubtful Accounts $2,068 (credit); Sales $1,334,800; Sales Returns and Allowances $47,000; and Sales Discounts $18,800. Wildhorse has a no cash policy. All sales were made on credit. Instructions: a) Record the adjusting entry at December 31, 2017, assuming bad debts are estimated to be (1) 10% of accounts receivable, and (2) 1.50% of net credit sales. b) Calculate the net realizable value of the accounts receivable for each approach to estimating uncollectible accounts above. c) Assume instead that the Allowance for Doubtful Accounts had a debit balance of $2,444 at December 31, 2017. What is the revised bad debt expense for 2017 and what is the net realizable value of the accounts receivable at December 31, 2017?
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter7: Receivables And Investments
Section: Chapter Questions
Problem 7.1P: Allowance Method for Accounting for Bad Debts At the beginning of 2016, EZ Tech Companys Accounts...
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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.
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Transcribed Image Text:The account balances of Wildhorse Company at December 31, 2017, the end of the current year,
show Accounts Receivable $169,200; Allowance for Doubtful Accounts $2,068 (credit); Sales
$1,334,800; Sales Returns and Allowances $47,000; and Sales Discounts $18,800.
Wildhorse has a no cash policy. All sales were made on credit.
Instructions:
a) Record the adjusting entry at December 31, 2017, assuming bad debts are estimated to be
(1) 10% of accounts receivable, and (2) 1.50% of net credit sales.
b) Calculate the net realizable value of the accounts receivable for each approach to estimating
uncollectible accounts above.
c)
Assume instead that the Allowance for Doubtful Accounts had a debit balance of $2,444 at
December 31, 2017. What is the revised bad debt expense for 2017 and what is the net
realizable value of the accounts receivable at December 31, 2017?
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