Foremost Manufacturing wants to buy $50,000 of sheet metal from Ore Industries on credit. Before agreeing to the sale, Ore decides to evaluate Foremost’s financial status. Of the following potential findings, which would lead Ore to refuse to sell the metal on credit? Foremost’s current liabilities are $450,000 and its current assets are $475,000. Foremost’s accounts receivable are $22,000 and its accounts payable are $21,000. Foremost’s current assets are $450,000 and its current liabilities are $475,000. Foremost’s accounts payable are $22,000 and its accounts receivable are $21,000.
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.
Foremost Manufacturing wants to buy $50,000 of sheet metal from Ore Industries on credit. Before agreeing to the sale, Ore decides to evaluate Foremost’s financial status. Of the following potential findings, which would lead Ore to refuse to sell the metal on credit?
Foremost’s current liabilities are $450,000 and its current assets are $475,000.
Foremost’s accounts receivable are $22,000 and its accounts payable are $21,000.
Foremost’s current assets are $450,000 and its current liabilities are $475,000.
Foremost’s accounts payable are $22,000 and its accounts receivable are $21,000.
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