E6-2A. Credit Losses Based on Accounts Receivable Aging Hunter, Inc., analyzed its accounts receiv- able balances at December 31, and arrived at the aged balances listed below, along with the per- centage that is estimated to be uncollectible: Probability of Noncollection Age Group Balance $ 90,00O O-30 days past due 31-60 days past due 61-120 days past due 121-18 0 days past due Over 180 days past due 20,000 11,000 2 6,000 4,000 10 25 $131,00O The company handles credit losses using the allowance method. The credit balance of the Alowance for Doubtful Accounts is $520 on December 31, before any adjustments. Determine the amount of the adjustment for estimated credit losses on December 31. Determine the financial statement effect of a write off of the Rose Company's account on April 10 of the following year in the amount of $425. a. b.
E6-2A. Credit Losses Based on Accounts Receivable Aging Hunter, Inc., analyzed its accounts receiv- able balances at December 31, and arrived at the aged balances listed below, along with the per- centage that is estimated to be uncollectible: Probability of Noncollection Age Group Balance $ 90,00O O-30 days past due 31-60 days past due 61-120 days past due 121-18 0 days past due Over 180 days past due 20,000 11,000 2 6,000 4,000 10 25 $131,00O The company handles credit losses using the allowance method. The credit balance of the Alowance for Doubtful Accounts is $520 on December 31, before any adjustments. Determine the amount of the adjustment for estimated credit losses on December 31. Determine the financial statement effect of a write off of the Rose Company's account on April 10 of the following year in the amount of $425. a. b.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Credit Losses Based on Accounts Receivable Aging Hunter, Inc., analyzed its accounts receiv-
able balances at December 31, and arrived at the aged balances listed below, along with the per-
centage that is estimated to be uncollectible:
LO1, 2
E6-2A.
MBC
Probability of
Noncollection
Age Group
Balance
$ 90,000
O-30 days past due
31-60 days past due
61-120 days past due
121-180 days past due
Over 180 days past due.
1
20,000
11,000
6,000
4,000
$131,000
2
5
10
25
The company handles credit losses using the allowance method. The credit balance of the Allowance
for Doubtful Accounts is $520 on December 31, before any adjustments.
Determine the amount of the adjustment for estimated credit losses on December 31.
Determine the financial statement effect of a write off of the Rose Company’s account on April
10 of the following year in the amount of $425.
a.
b.
Transcribed Image Text:E6-8A.
Credit Losses Based on Percentage of Credit Sales Los Altos, Inc. uses the allowance method
of handling its credit losses. It estimates credit losses at one percent of credit sales, which were
$1,800,000 during the year. On December 31, the Accounts Receivable balance was $300,000, and
the Allowance for Doubtful Accounts had a credit balance of $20,400 before adjustment.
Determine the amount and financial statement effect of the adjustment to record the credit
losses for the year.
a.
b.
Show ho w Accounts Receivable and the Allowance for Doubtful Accounts would appear in
the December 31 balance sheet.
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