eBook Organics Plus is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estimated at 4 percent of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 12 percent of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0-30 days past due at 6 percent, 31-90 days past due at 19 percent, and over 90 days past due at 26 percent. There is currently a zero balance, transferred from the prior year's Allowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet. 2018 Year-End Total for Organics Plus Credit Sales $1,880,000 Accounts Receivable 620,000 There is also additional information regarding the distribution of accounts receivable by age. Past-Due Accounts Receivable Category Total 0-30 days $360,000 31-90 days 120,000 Over 90 days 180,000 Required: A. Prepare the year-end adjusting entry for bad debt, using the (1) income statement method, (2) balance sheet method of receivables, and (3) balance sheet aging of receivables method. Dec. 31 (1) Dec. 31 (2)
eBook Organics Plus is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estimated at 4 percent of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 12 percent of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0-30 days past due at 6 percent, 31-90 days past due at 19 percent, and over 90 days past due at 26 percent. There is currently a zero balance, transferred from the prior year's Allowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet. 2018 Year-End Total for Organics Plus Credit Sales $1,880,000 Accounts Receivable 620,000 There is also additional information regarding the distribution of accounts receivable by age. Past-Due Accounts Receivable Category Total 0-30 days $360,000 31-90 days 120,000 Over 90 days 180,000 Required: A. Prepare the year-end adjusting entry for bad debt, using the (1) income statement method, (2) balance sheet method of receivables, and (3) balance sheet aging of receivables method. Dec. 31 (1) Dec. 31 (2)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Organics Plus is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of
receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estimated at 4 percent of credit sales. If it were
to use the balance sheet method, it would estimate bad debt at 12 percent of accounts receivable. If it were to use the balance sheet aging of receivables method, it
would split its receivables into three categories: 0-30 days past due at 6 percent, 31-90 days past due at 19 percent, and over 90 days past due at 26 percent. There is
currently a zero balance, transferred from the prior year's Allowance for Doubtful Accounts. The following information is available from the year-end income statement and
balance sheet.
2018 Year-End Total for Organics Plus
Credit Sales
$1,880,000
Accounts Receivable
620,000
There is also additional Information regarding the distribution of accounts receivable by age.
Past-Due
Accounts Receivable
Category
Total
0-30 days
$360,000
31-90 days
120,000
Over 90 days
180,000
Required:
A. Prepare the year-end adjusting entry for bad debt, using the (1) income statement method, (2) balance sheet method of receivables, and (3) balance sheet aging of
receivables method.
Dec. 31 (1)
Dec. 31 (2)
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