Flora and Fauna Company estimates its doubtful accounts by aging its accounts receivable and applying percentages to various aged categories of accounts. The Flora and Fauna Company computes a total of $7,200 in estimated doubtful accounts as of December 31, 2016. Its Accounts Receivable account has a balance of $225,600 and its Allowance for Doubtful Accounts has a credit balance of $1,200 before adjustment at December 31, 2016. How much bad debts expense will Flora and Fauna report in 2016? Group of answer choices $6,720 $6,000 $960 $7,680
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.
Flora and Fauna Company estimates its doubtful accounts by aging its
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