Blossom Equipment Sales Company, which sells only on account, had a $120,000 balance in its Accounts Receivable and a $4,200 balance in its Allowance for Expected Credit Losses on December 31, 2023. During 2024, the company's sales of equipment were $820,000, and its total cash collections from customers were $780,000. During year, the company identified customers with accounts totalling $6,000 that would be unable to pay and wrote these receivables off. However, one of these customers subsequently made a payment of $800. (Note that this amount is not included in the cash collections noted above.) At the end of 2024, management grouped its receivables based on credit risk and estimated the expected rate of credit losses for each group. Based on this, management determined that the total expected credit losses would be $7,200. what amount of credit losses would appear on the statement of income for the year ended december 31, 2024
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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.
Blossom Equipment Sales Company, which sells only on account, had a $120,000 balance in its
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