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 industryexpectations, 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.

Credit sales = total sales - cash sales = $500000 - 500000*2% = $490, 000

Answered: J & B Company uses the percentage of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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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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