J & B Company uses the percentage of sales approach to estimate its uncollectible accounts. The company’s annual sales for its first financial year of operations ending July 31, 2020 was $500,000, cash sales contributed to 2% of the overall sales and the 3 accounts receivable balance at year end was $75,000. Based on industry expectations, it estimated that 3% of its credit sales would be uncollectible. Required: Calculate the bad debt expense at July 31, 2020. Calculate the net receivable balance that would be reported in the Statement of Financial Position as at July 31, 2020.
J & B Company uses the percentage of sales approach to estimate its uncollectible accounts. The company’s annual sales for its first financial year of operations ending July 31, 2020 was $500,000, cash sales contributed to 2% of the overall sales and the 3 accounts receivable balance at year end was $75,000. Based on industry expectations, it estimated that 3% of its credit sales would be uncollectible. Required: Calculate the bad debt expense at July 31, 2020. Calculate the net receivable balance that would be reported in the Statement of Financial Position as at July 31, 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- J & B Company uses the percentage of sales approach to estimate its uncollectible accounts. The company’s annual sales for its first financial year of operations ending July 31, 2020 was $500,000, cash sales contributed to 2% of the overall sales and the 3
accounts receivable balance at year end was $75,000. Based on industry
expectations, it estimated that 3% of its credit sales would be uncollectible.
Required:
- Calculate the
bad debt expense at July 31, 2020. - Calculate the net receivable balance that would be reported in the
Statement of Financial Position as at July 31, 2020.
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