Arlington Cycle Company began operations on January 1, 2020. The company reported the following selected items in its 2021 financial report: 2021 2020 Gross sales $1,400,000 $1,500,000 Accounts receivable 600,000 650,000 Actual bad debt write-offs 22,000 10,000 Arlington estimates bad debts at 2 percent of gross sales. Analyze the activity in the allowance for bad debts T-account, and comment on whether the bad debt estimate has been sufficient to cover the write-offs.

Arlington Cycle Company began operations on January 1, 2020. The company reported the following selected items in its 2021 financial report: 2021 2020 Gross sales $1,400,000 $1,500,000 Accounts receivable 600,000 650,000 Actual bad debt write-offs 22,000 10,000 Arlington estimates bad debts at 2 percent of gross sales. Analyze the activity in the allowance for bad debts T-account, and comment on whether the bad debt estimate has been sufficient to cover the write-offs.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 12EB: Clovis Enterprises reports $845,500 in credit sales for 2018 and $933,000 in 2019. It has a $758,000...

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	2021	2020
Gross sales	$1,400,000	$1,500,000
Accounts receivable	600,000	650,000
Actual bad debt write-offs	22,000	10,000

Similar questions

Dortmund Stockyard reports $896,000 in credit sales for 2018 and $802,670 in 2019. It has a $675,000 accounts receivable balance at the end of 2018, and $682,000 at the end of 2019. Dortmund uses the balance sheet method to record bad debt estimation at 8% during 2018. To manage earnings more favorably, Dortmund changes bad debt estimation to the income statement method at 6% during 2019. A. Determine the bad debt estimation for 2018. B. Determine the bad debt estimation for 2019. C. Describe a benefit to Dortmund Stockyard in 2019 as a result of its earnings management.
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