E6-2A. Credit Losses Based on Accounts Receivable Aging Hunter, Inc., analyzed its accounts receiv- able balances at December 31, and arrived at the aged balances listed below, along with the per- centage that is estimated to be uncollectible: Probability of Age Group Balance Noncollection $ 90,000 20,000 0-30 days past due 31-60 days past due 61-120 days past due 121-180 days past due Over 180 days past due. 1 11,000 6,000 10 4,000 $131,000 The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $520 on December 31, before any adjustments. Determine the amount of the adjustment for estimated credit losses on December 31. Determine the financial statement effect of a write off of the Rose Company's account on April 10 of the following year in the amount of $425. a. b.
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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.
Accounts receivable are the current assets for the organization which represents the due amounts to be received from the customers with a year.
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