Harlan Company uses the Allowance method for accounting for receivables. They had the following information as of December 31, 2022: Net Credit Sales, year 2022 6,867,750 Accounts Receivable, December 31, 2021 655,000 Accounts Receivable, December 31, 2022 745,000 Allowance for Doubtful Accounts, December 31, 2022 4,350 Credit Harlan Company estimates that 2% of the Accounts Receivable will become uncollectible. Questions: Prepare the adjusting entry to record Bad Debt Expense for the year 2022. Be sure to show your calculations as to how you determined your amount). What is the Cash Realizable Value of the receivables at December 31, 2022 (after adjusting for bad debt expense for the period)? Show your calculations. Assume, instead, that for part (a) of this problem, the beginning balance in the Allowance account was a DEBIT balance. Prepare the adjusting entry you would make to record Bad Debt Expense for the period. (Be sure to show your calculations as to how you determined your amount).
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.
Harlan Company uses the Allowance method for accounting for receivables. They had the following information as of December 31, 2022:
|
Net Credit Sales, year 2022 |
6,867,750 |
|||
|
|
655,000 |
|||
|
Accounts Receivable, December 31, 2022 |
745,000 |
|||
|
Allowance for Doubtful Accounts, December 31, 2022 |
4,350 |
Credit |
Harlan Company estimates that 2% of the Accounts Receivable will become uncollectible.
Questions:
- Prepare the
adjusting entry to recordBad Debt Expense for the year 2022. Be sure to show your calculations as to how you determined your amount). - What is the Cash Realizable Value of the receivables at December 31, 2022 (after adjusting for bad debt expense for the period)? Show your calculations.
- Assume, instead, that for part (a) of this problem, the beginning balance in the Allowance account was a DEBIT balance. Prepare the adjusting entry you would make to record Bad Debt Expense for the period. (Be sure to show your calculations as to how you determined your amount).
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