Principles of Accounting Volume 1
19th Edition
ISBN: 9781947172685
Author: OpenStax
Publisher: OpenStax College
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- Angelos Outlet used to report bad debt using the balance sheet method and is now switching to the income statement method. The percentage uncollectible will remain constant at 5%. Credit sales figures for 2019 were $866,000, and accounts receivable was $732,000. How much will Angelos Outlet report for 2019 bad debt estimation under the income statement method?arrow_forwardIt is February 16, 2020, and you are auditing Davenport Corporation's financial statements for 2019 (which will be issued in March 2020). You read in the newspaper that Travis Corporation, a major customer of Davenport, is in financial difficulty. Included in Davenports accounts receivable is 50,000 (a material amount) owed to it by Travis. You approach Jim Davenport, president, with this information and suggest that a reduction of accounts receivable and recognition of a loss for 2019 might be appropriate. Jim replies, Why should we make an adjustment? Ted Travis, the president of Travis Corporation, is a friend of mine; he will find a way to pay us, one way or another. Furthermore, this occurred in 2020, so lets wait and see what happens; we can always make an adjustment later this year. Our 2019 income and year-end working capital are not that high; our creditors and shareholders wouldnt stand for lower amounts than they already are. Required: From financial reporting and ethical perspectives, prepare a response to Jim Davenport regarding this issue.arrow_forwardMirror Mart uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable debt for 2019. To manage earnings more efficiently, Mirror Mart decided to change past-due categories as follows. Complete the following. A. Complete each table by filling in the blanks. B. Determine the difference between total uncollectible. C. Explain how the new total uncollectible amount affects net income and accounts receivable.arrow_forward
- Outpost Designs uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable debt for 2019. To manage earnings more favorably, Outpost Designs decided to change past-due categories as follows. Complete the following. A. Complete each table by filling in the blanks. B. Determine the difference between total uncollectible. C. Explain how the new total uncollectible amount affects net income and accounts receivable.arrow_forwardClovis Enterprises reports $845,500 in credit sales for 2018 and $933,000 in 2019. It has a $758,000 accounts receivable balance at the end of 2018 and $841,000 at the end of 2019. Clovis uses the income statement method to record bad debt estimation at 4% during 2018. To manage earnings more favorably, Clovis changes bad debt estimation to the balance sheet method at 5% during 2019. A. Determine the bad debt estimation for 2018. B. Determine the bad debt estimation for 2019. C. Describe a benefit to Clovis Enterprises in 2019 as a result of its earnings management.arrow_forwardHow do I solve this?arrow_forward
- Harmon, Inc. uses the aging of receivables method to account for the allowance of doubtful accounts and the recording of bad debt expense. Below is the aging of the accounts receivable along with the associated estimation of uncollectibility. a. Calculate the amount estimated to be uncollectible at the end of 2021. b. Record the year-end entry to record the bad debt expense if there was a credit balance of $12,000 in the Allowance for Doubtful Accounts at the end of 2021 before the year-end entry. c. Record the year-end entry to record the bad debt expense if there was a debit balance of $3,500 in the Allowance for Doubtful Accounts at the end of 2021 before the year-end entry. Harmon, Inc - Accounts Receivable Aging Balances - December 31, 2021 Total 1-30 Days 31-60 Days 61-90 Days 91-120 Days…arrow_forwardAn analysis completed by the controller’s office, using the balance sheet approach, indicates that 5% of total accounts receivable is uncollectible. In 2022, the controller estimated bad debts at 5.5% of accounts receivable. (Hint: When the balance sheet approach is used, the unadjusted balance in the Allowance account must be considered in the computation of bad debts expense.) Balance in allowance account- $6120 Accounts Receivable-$284171 What is the adjusting entry?arrow_forwardplease help me with thisarrow_forward
- Determine the amount of receivables that may not be collectible in the future as on June 30, 2020.arrow_forwardMarigold Corp. had a 1/1/20 balance in the Allowance for Doubtful Accounts of $33500. During 2020, it wrote off $21700 of accounts and collected $6180 on accounts previously written off. The balance in Accounts Receivable was $630000 at 1/1 and $740000 at 12/31. At 12/31/20, Marigold estimates that 7% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2020? O $37000. O $18300. O $33820. O $40000.arrow_forwardCrane Company had a 1/1/20 balance in the Allowance for Doubtful Accounts of $33500. During 2020, it wrote off $22000 of accounts and collected $6620 on accounts previously written off. The balance in Accounts Receivable was $630000 at 1/1 and $730000 at 12/31. At 12/31/20, Crane estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2020? $18380. $25000. $3000. $36500.arrow_forward
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