Baby Boomers, Ltd.. had gross sales of $4,000,000 on credit during the year 2021. Sales returns and allowances in 2021 were $320,000 and trade discounts given to customers were $80,000.During 2021, the company also collected $3,200,000 cash from credit sales.The company uses the allowance method for bad debts, and at the end of 2021, the CFO of the company estimates that 1% of total credit sales will never be collectible. Few months later, in April 2022 a customer confirms the company that he will never pay $8,000.Required: a) Prepare a detailed presentation of the revenue section of the income statement for the year 2021. b) Show the journal entries for the years 2021 and 2022.
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.
Question 2
Baby Boomers, Ltd.. had gross sales of $4,000,000 on credit during the year 2021. Sales returns and allowances in 2021 were $320,000 and trade discounts given to customers were $80,000.During 2021, the company also collected $3,200,000 cash from credit sales.The company uses the allowance method for
later, in April 2022 a customer confirms the company that he will never pay $8,000.Required:
a) Prepare a detailed presentation of the revenue section of the income statement for the
year 2021.
b) Show the
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