FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Allowance Method for Doubtful Accounts
Averys All-Natural Company supplies wigs and hair care products to beauty salons throughout Texas and the Southwest. The
| Days Past Due | |||||||||
| Customer | Balance | Not Past Due |
1–30 | 31–60 | 61–90 | 91–120 | Over 120 | ||
| AAA Beauty | 27,500 | 27,500 | |||||||
| Amelia's Wigs | 3,750 | 3,750 | |||||||
| Zim’s Beauty | 1,650 | 1,650 | |||||||
| Totals | 1,100,000 | 750,000 | 180,000 | 75,000 | 45,000 | 22,000 | 28,000 |
Averys All-Natural Company has a past history of uncollectible accounts by age category, as follows:
| Age Class | Percent Uncollectible |
||
| Not past due | 1 | % | |
| 1–30 days past due | 3 | ||
| 31–60 days past due | 7 | ||
| 61–90 days past due | 16 | ||
| 91–120 days past due | 40 | ||
| Over 120 days past due | 90 |
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Transcribed Image Text:6. Assume that instead of using the allowance method, Averys All-Natural uses the direct writeoff method. Illustrate the effect on the accounts and financial statements of the following:
a. The write-off of the Superior Images account on March 4, 20Y8.
If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.
Balance Sheet
Statement of Cash
Assets
Liabilities
Stockholders' Equity
+
Flows
20Y8 Mar. 4
Statement of Cash Flows
Income Statement
b. The (1) reinstatement and (2) collection of the Superior Images account on August 17, 20Y8.
(1) reinstatement
If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.
Balance Sheet
Statement of Cash
Assets
Liabilities
Stockholders' Equity
Flows
20Υ8 Aυg. 17
Statement of Cash Flows
Income Statement
Transcribed Image Text:(2) collection
If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.
Balance Sheet
Statement of Cash
Assets
Liabilities
Stockholders' Equity
+
Flows
20Y8 Aug. 17
Statement of Cash Flos
Income Statement
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