At the beginning of the year, the credit balance in the Allowance for Doubtful Accounts for Healthcare Inc. was $80,000. The provision (expense) for doubtful accounts is computed based on a percentage of net credit sales. Total sales revenue for the year amounted to $30 million, of which one-third was on credit. Based on the latest available information, the provision needed for doubtful accounts is estimated to be 0.75% of net credit sales. During the year, uncollectible receivables amounting to $88,000 were written off. a. Compute the ending balance in the Allowance for Doubtful Accounts at December 31. b. Prepare its entries (1) to write off uncollectible accounts and (2) to recognize bad debt expense. c. At the end of the year, the allowance is estimated based on the following aging of accounts receivable. What is the estimated Allowance for Doubtful Accounts balance at December 31? d. What information is available from the aging analysis in part c that is not apparent when using the percentage of credit sales approach? - Percentage of receivables older than 91 days: % - Average balance of receivables greater than 120 days due: $
At the beginning of the year, the credit balance in the Allowance for Doubtful Accounts for Healthcare Inc. was $80,000. The provision (expense) for doubtful accounts is computed based on a percentage of net credit sales. Total sales revenue for the year amounted to $30 million, of which one-third was on credit. Based on the latest available information, the provision needed for doubtful accounts is estimated to be 0.75% of net credit sales. During the year, uncollectible receivables amounting to $88,000 were written off.
a. Compute the ending balance in the Allowance for Doubtful Accounts at December 31.
b. Prepare its entries (1) to write off uncollectible accounts and (2) to recognize
c. At the end of the year, the allowance is estimated based on the following aging of accounts receivable. What is the estimated Allowance for Doubtful Accounts balance at December 31?
d. What information is available from the aging analysis in part c that is not apparent when using the percentage of credit sales approach?
- Percentage of receivables older than 91 days: %
- Average balance of receivables greater than 120 days due: $
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