pey's Bike Shop sells new and used bicycle parts. Although a majority of its sales are cash sales, it makes a significant amount of edit sales. During Year 1, its first year of operations, Joey's Bike Shop experienced the following. Sales on account Cash sales Collections of accounts receivable Uncollectible accounts charged off during the year $288,300 696,700 273,885 1,413 equired Assume that Joey's Bike Shop uses the allowance method of accounting for uncollectible accounts and estimates that 1 percent of its sales on account will not be collected. Answer the following questions: (1) What is the Accounts Receivable balance at December 31, Year 1? (2) What is the ending balance of the Allowance for Doubtful Accounts at December 31, Year 1, after all entries and adjusting entrie are posted? (3) What is the amount of uncollectible accounts expense for Year 1? (4) What is the net realizable value of accounts receivable at December 31, Year 1?
pey's Bike Shop sells new and used bicycle parts. Although a majority of its sales are cash sales, it makes a significant amount of edit sales. During Year 1, its first year of operations, Joey's Bike Shop experienced the following. Sales on account Cash sales Collections of accounts receivable Uncollectible accounts charged off during the year $288,300 696,700 273,885 1,413 equired Assume that Joey's Bike Shop uses the allowance method of accounting for uncollectible accounts and estimates that 1 percent of its sales on account will not be collected. Answer the following questions: (1) What is the Accounts Receivable balance at December 31, Year 1? (2) What is the ending balance of the Allowance for Doubtful Accounts at December 31, Year 1, after all entries and adjusting entrie are posted? (3) What is the amount of uncollectible accounts expense for Year 1? (4) What is the net realizable value of accounts receivable at December 31, Year 1?
Managerial Accounting: The Cornerstone of Business Decision-Making
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Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 27BEB: Last year, Tobys Hats had net sales of 45,000,000 and cost of goods sold of 29,000,000. Tobys had...
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Question
Transcribed Image Text:Joey's Bike Shop sells new and used bicycle parts. Although a majority of its sales are cash sales, it makes a significant amount of
credit sales. During Year 1, its first year of operations, Joey's Bike Shop experienced the following.
Sales on account
Cash sales
Collections of accounts receivable
Uncollectible accounts charged off during the year
$288,300
696,700
273,885
1,413
Required
a. Assume that Joey's Bike Shop uses the allowance method of accounting for uncollectible accounts and estimates that 1 percent of
its sales on account will not be collected. Answer the following questions:
(1) What is the Accounts Receivable balance at December 31, Year 1?
(2) What is the ending balance of the Allowance for Doubtful Accounts at December 31, Year 1, after all entries and adjusting entries
are posted?
(3) What is the amount of uncollectible accounts expense for Year 1?
(4) What is the net realizable value of accounts receivable at December 31, Year 1?
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VIEWStep 2: 1) The calculation of Accounts Receivable, December 31, year 1 is as follows-
VIEWStep 3: 2) The calculation of Allowance for Doubtful Accounts, December 31 is as follows-
VIEWStep 4: 3) The calculation of uncollectible accounts expenses is as follows-
VIEWStep 5: 4) The net realizable value on December 31, year 1 is as follows-
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Transcribed Image Text:### Accounting for Uncollectible Accounts: Direct Write-Off Method
#### Scenario:
Assume that Joey’s Bike Shop uses the direct write-off method of accounting for uncollectible accounts. Answer the following questions:
1. **What is the Accounts Receivable balance at December 31, Year 1?**
2. **What is the amount of uncollectible accounts expense for Year 1?**
3. **What is the net realizable value of accounts receivable at December 31, Year 1?**
This inquiry requires understanding the direct write-off method, where bad debts are written off directly against income at the point they are deemed uncollectible.
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