A recent annual report for RVC contained the following information (dollars in thousands) at the end of its fiscal year: Year 2 Year 1 Accounts receivable $ 9,077,000 $ 8,620,000 Allowance for doubtful accounts (1,020,000 ) (552,000 ) $ 8,057,000 $ 8,068,000 A footnote to the financial statements disclosed that uncollectible accounts amounting to $816,000 and $426,000 were written off as bad debts during year 2 and year 1, respectively. Assume that the tax rate for RVC was 35 percent. Required: 1. Determine the bad debt expense for year 2 based on the preceding facts.(Hint: Use the Allowance for Doubtful Accounts T-account to solve for the missing value.) (Enter your answers in thousands not in dollars.) 2. Working capital is defined as current assets minus current liabilities. Would the working capital be affected by the write-off of an uncollectible account? 3. Would the net income be affected by the $816,000 write-off during year 2?
Bad Debts
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.
A recent annual report for RVC contained the following information (dollars in thousands) at the end of its fiscal year:
| Year 2 | Year 1 | ||||||
| $ | 9,077,000 | $ | 8,620,000 | ||||
| Allowance for doubtful accounts | (1,020,000 | ) | (552,000 | ) | |||
| $ | 8,057,000 | $ | 8,068,000 | ||||
A footnote to the financial statements disclosed that uncollectible accounts amounting to $816,000 and $426,000 were written off as
Required:
1. Determine the bad debt expense for year 2 based on the preceding facts.(Hint: Use the Allowance for Doubtful Accounts T-account to solve for the missing value.) (Enter your answers in thousands not in dollars.)
2.
3. Would the net income be affected by the $816,000 write-off during year 2?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
