Gilmore Electronics had the following data for a recent year:Cash sales $135,000Credit sales 512,000Accounts receivable determined to be uncollectible 9,650The firm’s estimated rate for bad debts is 2.2% of credit sales Required:1. Prepare the journal entry to write off the uncollectible accounts.2. Prepare the journal entry to record the estimate of bad debt expense.3. If Gilmore had written off $3,000 of receivables as uncollectible during the year, how much would bad debt expense reported on the income statement have changed?4. CONCEPTUAL CONNECTION If Gilmore’s estimate of bad debts is correct (2.2% of credit sales) and the gross margin is 20%, by how much did Gilmore’s income from operationsincrease assuming $150,000 of the sales would have been lost if credit sales were not offered?
Gilmore Electronics had the following data for a recent year:Cash sales $135,000Credit sales 512,000Accounts receivable determined to be uncollectible 9,650The firm’s estimated rate for bad debts is 2.2% of credit sales Required:1. Prepare the journal entry to write off the uncollectible accounts.2. Prepare the journal entry to record the estimate of bad debt expense.3. If Gilmore had written off $3,000 of receivables as uncollectible during the year, how much would bad debt expense reported on the income statement have changed?4. CONCEPTUAL CONNECTION If Gilmore’s estimate of bad debts is correct (2.2% of credit sales) and the gross margin is 20%, by how much did Gilmore’s income from operationsincrease assuming $150,000 of the sales would have been lost if credit sales were not offered?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
| Gilmore Electronics had the following data for a recent year: Cash sales $135,000 Credit sales 512,000 Accounts receivable determined to be uncollectible 9,650 The firm’s estimated rate for 1. Prepare the 2. Prepare the journal entry to record the estimate of bad debt expense. 3. If Gilmore had written off $3,000 of receivables as uncollectible during the year, how much would bad debt expense reported on the income statement have changed? 4. CONCEPTUAL CONNECTION If Gilmore’s estimate of bad debts is correct (2.2% of credit sales) and the gross margin is 20%, by how much did Gilmore’s income from operations increase assuming $150,000 of the sales would have been lost if credit sales were not offered? |
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