Estimate Uncollectible Accounts 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 14 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 $12,500,000 20Y3 12,600,000 2014 12,800,000 20Y5 13,000,000 20Y2 $12,800 23,000 34,000 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 and for recommendations for change. Allowance for Doubtful Accounts Instructions: 1. Determine the amount of (a) the addition to Allowance for Doubtful Accounts and (b) the accounts written off for each of the four years. a. Addition to allowance for doubtful accounts b. Accounts written off during year 20Y2 31,250 ✔ 18,450 ✔ 20Y3 31,500✔ X 2014 32,000✔ 20Y5 32,500✔
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.
I have no idea what this question is asking. Will you please teach me how to solve for the remaining 3 blanks?
(See image, attached)
Allowance for Doubtful Account :— An allowance for doubtful accounts is considered a contra asset because it reduces the amount of an asset, in this case the accounts receivable.
The allowance, sometimes called a bad debt reserve, represents management's estimate of the amount of accounts receivable that will not be paid by customers.
Account Write Off During Year :— when a small business determines an invoice is uncollectible they can debit the Bad Debts Expense account and credit Accounts Receivable immediately.
Step by step
Solved in 2 steps
