Indigo Corporation had record sales in 2023. It began 2023 with an Accounts Receivable balance of $613,500 and an Allowance for Expected Credit Losses of $40,400. Indigo recognized credit sales during the year of $8,020,000 and made monthly adjusting entries equal to 0.5% of each month's credit sales to recognize the loss on impairment. Also during the year, the company wrote off $42,400 of accounts that were deemed to be uncollectible, although one customer whose $4,800 account had been written off surprised management by paying the amount in full in late September. Including this surprise receipt, $7,882,200 in cash was collected on account in 2023. To assess the reasonableness of the allowance for expected credit losses, the controller prepared the following aged listing of the receivables at December 31, 2023: Days Account Outstanding Less than 16 days Between 16 and 30 days Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days (b) Amount $378,500 139,600 96,000 45,600 24,000 30,000 $713,700 Your Answer Correct Answer Probability of Collection 97% 92% 80% 70% 50% 0% Your answer is partially correct Prepare the adjusting entry to bring the Allowance for Expected Credit Losses to its proper balance at year end. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter"0" for the amounts List all debit entries before credit entries)
Indigo Corporation had record sales in 2023. It began 2023 with an Accounts Receivable balance of $613,500 and an Allowance for Expected Credit Losses of $40,400. Indigo recognized credit sales during the year of $8,020,000 and made monthly adjusting entries equal to 0.5% of each month's credit sales to recognize the loss on impairment. Also during the year, the company wrote off $42,400 of accounts that were deemed to be uncollectible, although one customer whose $4,800 account had been written off surprised management by paying the amount in full in late September. Including this surprise receipt, $7,882,200 in cash was collected on account in 2023. To assess the reasonableness of the allowance for expected credit losses, the controller prepared the following aged listing of the receivables at December 31, 2023: Days Account Outstanding Less than 16 days Between 16 and 30 days Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days (b) Amount $378,500 139,600 96,000 45,600 24,000 30,000 $713,700 Your Answer Correct Answer Probability of Collection 97% 92% 80% 70% 50% 0% Your answer is partially correct Prepare the adjusting entry to bring the Allowance for Expected Credit Losses to its proper balance at year end. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter"0" for the amounts List all debit entries before credit entries)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
Transcribed Image Text:Indigo Corporation had record sales in 2023. It began 2023 with an Accounts Receivable balance of $613,500 and an Allowance for
Expected Credit Losses of $40,400. Indigo recognized credit sales during the year of $8,020,000 and made monthly adjusting entries
equal to 0.5% of each month's credit sales to recognize the loss on impairment. Also during the year, the company wrote off $42,400
of accounts that were deemed to be uncollectible, although one customer whose $4,800 account had been written off surprised
management by paying the amount in full in late September. Including this surprise receipt, $7,882,200 in cash was collected on
account in 2023.
To assess the reasonableness of the allowance for expected credit losses, the controller prepared the following aged listing of the
receivables at December 31, 2023:
Days Account Outstanding
Less than 16 days
Between 16 and 30 days
Between 31 and 45 days
Between 46 and 60 days
Between 61 and 75 days
Over 75 days
(b)
Amount
$378,500
139,600
96,000
45,600
Dec. 31
24,000
30,000
$713,700
Your Answer Correct Answer
Your answer is partially correct
Loss on impairment
Probability of Collection
Allowance for Expected Credit Losses
97%
92%
80%
70%
Prepare the adjusting entry to bring the Allowance for Expected Credit Losses to its proper balance at year end. (Credit account
titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the
account titles and enter "0" for the amounts List all debit entries before credit entries)
Date Account Titles and Explanation
50%
0%
Debit
97403
Credit
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