The following is a portion of the current assets section of the balance sheets of Avanti's, Inc., at December 31, 2020 and 2019: 12/31/20 12/31/19 Accounts receivable, less allowance for baddebts of $9,750 and $15,336, respectively $179,866 $225,851 Required:a. If $11,849 of accounts receivable were written off during 2020, what was the amount of bad debts expense recognized for the year? (Hint: Use a T-account model of the Allowance account, plug in the three amounts that you know, and solve for the unknown.) b. The December 31, 2020, Allowance account balance includes $3,034 for a past due account that is not likely to be collected. This account has not been written off.(1) If it had been written off, will there be any effect of the write-off on the working capital at December 31, 2020? Yes No (2) If it had been written off, will there be any effect of the write-off on net income and ROI for the year ended December 31, 2020? Yes No c. The level of Avanti's sales in 2020 were probably lower as compared to 2019. True False
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.
The following is a portion of the current assets section of the balance sheets of Avanti's, Inc., at December 31, 2020 and 2019:
| 12/31/20 | 12/31/19 | |
| Accounts receivable, less allowance for debts |
$179,866 | $225,851 |
Required:
a. If $11,849 of accounts receivable were written off during 2020, what was the amount of bad debts expense recognized for the year? (Hint: Use a T-account model of the Allowance account, plug in the three amounts that you know, and solve for the unknown.)
b. The December 31, 2020, Allowance account balance includes $3,034 for a past due account that is not likely to be collected. This account has not been written off.
(1) If it had been written off, will there be any effect of the write-off on the
-
Yes
-
No
(2) If it had been written off, will there be any effect of the write-off on net income and
-
Yes
-
No
c. The level of Avanti's sales in 2020 were probably lower as compared to 2019.
-
True
-
False
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