Banana Co. began operations on January 2, 20x1. Banana uses the "installment sales method" of accounting. Banana's records on December 31, 20x1 show the following information: Installment accounts receivable, Dec. 31, 20x1 800,000 Deferred gross profit, before year-end adjustment Gross profit on sales 560,000 40% How much is the realized gross profit in 20x1?

Banana Co. began operations on January 2, 20x1. Banana uses the "installment sales method" of accounting. Banana's records on December 31, 20x1 show the following information: Installment accounts receivable, Dec. 31, 20x1 800,000 Deferred gross profit, before year-end adjustment Gross profit on sales 560,000 40% How much is the realized gross profit in 20x1?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Percent of Sales Method At the end of the current year, Accounts Receivable has a balance of $3,460,000; Allowance for Doubtful Accounts has a debit balance of $12,500; and sales for the year total $46,300,000. Bad Debt Expense is estimated at % of 1% of sales. a. Determine the amount of the adjusting entry for uncollectible accounts. b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense c. Determine the net realizable value of accounts receivable.
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For several years, EquiPrime Co.'s sales have been on a "cash only" basis. On January 1, 20Y2, however, EquiPrime Co. began offering credit on terms of n/30. The amount of the adjusting entry to record the estimated uncollectible receivables at the end of each year has been ¼ of 1% of credit sales, which is the rate reported as the average for the industry. Credit sales and the year-end credit balances in Allowance for Doubtful Accounts for the past four years are as follows: Year Credit Sales Allowance forDoubtful Accounts 20Y2 $12,500,000 $12,800 20Y3 12,600,000 23,000 20Y4 12,800,000 34,000 20Y5 13,000,000 49,000 Mandy Pulaski, president of EquiPrime Co., is concerned that the method used to account for and write off uncollectible receivables is unsatisfactory. She has asked for your advice in the analysis of past operations in this area…
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