.1 Compute the balance required in the expected credit loss accounts. 1.2 Prepare the journal entry to record the expect credit loss for the current year. 1.3 Compute the net realizable value of Sammy’s accounts receivable for year-end on Statement of Financial Position.
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.
ข้อ1 Sammy’s Downtown Properties developed an aged schedule of accounts receivable at the end of each year.
Sammy’s Downtown Properties: Aged Schedule of Accounts Receivable
(In the picture)
The company estimated an expected credit loss based on the following rules:
Aging Category Probability of Collection
Current 4%
1-30 Days 8%
31-60 Days 10%
61-90 Days 35%
Over 90 Days 50%
Sammy’s reported net credit sales of 4,500,000 for the current year. We present the company’s ending balancesof accounts receivable and the credit loss allowance below:
Accounts Receivable
Ending Balance 587,400
Credit loss allowance
120,000 Unadjusted Ending Balance
Instruction:
1.1 Compute the balance required in the expected credit loss accounts.
1.2 Prepare the
1.3 Compute the net realizable value of Sammy’s accounts receivable for year-end on
Financial Position
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