he Accounts Receivable balance for River Corporation is $407,000 as of January 31, 2020. Before calculating and recording January 2020 Bad Debt Expense, the Allowance for Doubtful Accounts has a credit balance of $2,000. Credit sales for January 2020 are $3,700,000, and over the past several years, 1.5% of credit sales have proven uncollectible. An aging of River Corporation’s Accounts Receivable results in a $51,950 estimate for the Allowance for Doubtful Accounts as of January 31, 2020. Part A: PERCENT OF SALES METHOD Assume that River Corporation uses the percent of sales method to estimate future uncollectible accounts. a. What adjusting entry does River make to record January 2020 Bad Debt Expense? fill in the blank 2 fill in the blank 4 b. What is the “Accounts Receivable, net” on River’s January 31, 2020 Balance Sheet? fill in the blank 5 c. What is “Bad Debt Expense” on River’s January 2020 Income Statement? fill in the blank 6
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.
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Part A: PERCENT OF SALES METHOD
Assume that River Corporation uses the percent of sales method to estimate future uncollectible accounts.
a. What
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fill in the blank 2 | |
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fill in the blank 4 |
b. What is the “Accounts Receivable, net” on River’s January 31, 2020 Balance Sheet?
fill in the blank 5
c. What is “Bad Debt Expense” on River’s January 2020 Income Statement?
fill in the blank 6
Part B: ANALYSIS OF RECEIVABLES METHOD
Assume that River Corporation instead uses the analysis of receivables method to estimate future uncollectible accounts.
a. What adjusting entry does River make to record January 2020 Bad Debt Expense?
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fill in the blank 8 | |
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fill in the blank 10 |
b. What is the “Accounts Receivable, net” on River’s January 31, 2020 Balance Sheet?
fill in the blank 11
c. What is “Bad Debt Expense” on River’s January 2020 Income Statement?
fill in the blank 12
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