egan December with an accounts receivable balance (net of bad debts) of €25,000. b. Walken had credit sales of €85,000. c. Walken had cash collections of €30,000. d. Walken factored €20,000 of net accounts receivable with Reliable Factor Company, transferring all risks and rewards associated with the receivable, and otherwise meeting all criteria necessary to qualify for treating the transfer
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.
The following facts apply to Walken Company during December 2021:
a. Walken began December with an
b. Walken had credit sales of €85,000.
c. Walken had cash collections of €30,000.
d. Walken factored €20,000 of net accounts receivable with Reliable Factor Company, transferring all
risks and rewards associated with the receivable, and otherwise meeting all criteria necessary to
qualify for treating the transfer of receivables as a sale.
e. Walken factored €15,000 of net accounts receivable with Dependable Factor Company, retaining
all risks and rewards associated with the receivable, and otherwise meeting all criteria necessary
to qualify for treating the transfer of receivables as a sale.
f. Walken did not recognize any additional bad debts expense, and had no write-offs of bad debts
during the month.
g. At December 31, 2021, Walken had a balance of €40,000 of cash at M&V Bank and an overdraft of
(€5,000) at First National Bank. (That cash balance includes any effects on cash of the other transactions described in this problem.)
Prepare the cash and accounts receivable lines of the current assets section of Walken’s
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