Assume that the percentage of sales method was used instead by the company and that on December 31st, 2010 5% of 2010 ‘s credit sales are estimated to be uncollectible. Assume Sales for 2010 were 520,000 (60% relates to cash sales) You are now required to: Determine the amount to be charged to the uncollectible expense account. (1) Prepare the Allowance for uncollectible account for 2010, using this method (ii) Prepare the balance sheet extract to show the net realizable value of the Accounts Receivable as at December 31 2010
Assume that the percentage of sales method was used instead by the company and that on December 31st, 2010 5% of 2010 ‘s credit sales are estimated to be uncollectible. Assume Sales for 2010 were 520,000 (60% relates to cash sales) You are now required to: Determine the amount to be charged to the uncollectible expense account. (1) Prepare the Allowance for uncollectible account for 2010, using this method (ii) Prepare the balance sheet extract to show the net realizable value of the Accounts Receivable as at December 31 2010
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
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.
Question
- Assume that the percentage of sales method was used instead by the company and that on December 31st, 2010 5% of 2010 ‘s credit sales are estimated to be uncollectible. Assume Sales for 2010 were 520,000 (60% relates to cash sales)
You are now required to:
- Determine the amount to be charged to the uncollectible expense account.
- (1) Prepare the Allowance for uncollectible account for 2010, using this method
(ii) Prepare the balance sheet extract to show the net realizable value of the Accounts Receivable as at December 31 2010
Transcribed Image Text:Slow Running Shoes uses the Aging of receivables method to account for
uncollectible accounts.
The balance in the Allowance for uncollectible account as at Jan 1st, 2010 was $10,500
(credit)
The balance in the Accounts Receivable account as at Jan 1st, 201o was $133,000.
The company completed the following transactions during 2010 and 2011:
2010
June 10th
Wrote off the balance of $600 from Manny
Miller's account as uncollectible
Re-instated the account of Betty Lou and
recorded the collection of $1200 as payment
in full for her account which had been written
off earlier
Recorded the uncollectible account expense
based on the aging schedule. The schedule
showed that $14,100 of accounts receivable
was estimated as uncollectible
September 15th
December 31st
December 31st
Made the closing entry for the uncollectible
expense account
2011
Sold inventory to Jack Frost, $1100, on
Jan 17
account
Wrote off as uncollectible the accounts of
Barry Semper, $1,500; Maria Jesus $1,400
and Rory Paul $200
Received 40% of the amount owed by Jack
August 15
September 26
Frost and wrote off the remainder as
uncollectible
Received 20% of the funds owed from Maria
Jesus as part payment of her account which
had been written off earlier as uncollectible
The Aging schedule showed an estimated
$7500 as uncollectible
October 16
December 31
4. Assume that the percentage of sales method was used instead by the company and that on
December 31st, 2010 5% of 2010 's credit sales are estimated to be uncollectible. Assume
Sales for 2010 were 520,000 (60% relates to cash sales)
You are now required to:
a. Determine the amount to be charged to the uncollectible expense account.
b. (1) Prepare the Allowance for uncollectible account for 2010, using this method
(ii) Prepare the balance sheet extract to show the net realizable value of the Accounts
Receivable as at December 31 2010
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education