Financial Accounting
4th Edition
ISBN: 9781259307959
Author: J. David Spiceland, Wayne M Thomas, Don Herrmann
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 5, Problem 5.20E
Compare the percentage-of-receivables method and the percentage-of-credit-sales method (LO5–9)
Refer to the information in E5–19, but now assume that the balance of the Allowance for Uncollectible Accounts on December 31, 2018, is $1,100 (debit) (before adjustment).
Required:
1. Record the adjustment for uncollectible accounts using the percentage-of-receivables method. Suzuki estimates 12% of receivables will not be collected.
2. Record the adjustment for uncollectible accounts using the percentage-of-credit-sales method. Suzuki estimates 3% of credit sales will not be collected.
3. Calculate the effect on net income (before taxes) and total assets in 2018 for each method.
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The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $656 of accounts
receivable are uncollectible. Allowance for Doubtful Accounts has a debit balance of $193. The adjusting entry at the end of the year will
include a credit to Allowance for Doubtful Accounts in the amount of
Oa. $849
Ob. $656
Oc. $193
Od. $463
How do you adjust this: (Adjusting entry)
Allowance for doubtful accounts is ascertained to be 5% of the outstanding accounts receivable, 150000
Suzuki Supply reports the following amounts at the end of 2024 (before adjustment).
Credit Sales for 2024
Accounts Receivable, December 31, 2024
Allowance for Uncollectible Accounts, December 31, 2024
$244,000
39,000
1,100 (Credit)
Required:
1. Record the adjusting entry for uncollectible accounts using the percentage-of-receivables method. Suzuki estimates 12% of
receivables will not be collected.
2. Record the adjusting entry for uncollectible accounts using the percentage-of-credit-sales method. Suzuki estimates 3% of credit
sales will not be collected.
3. Calculate the effect on net income (before taxes) and total assets in 2024 for each method.
Chapter 5 Solutions
Financial Accounting
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Accounts Receivable and Accounts Payable; Author: The Finance Storyteller;https://www.youtube.com/watch?v=x_aUWbQa878;License: Standard Youtube License