LaFond Company analyzes its accounts receivable at December 31, and arrives at the age categories below along with the percentages that are estimated as uncollectible. Accounts Estimated Receivable Loss % $ 135,000 196 30,000 16,500 9,000 6,000 $196,500 Age Group 0-30 days past due 31-60 days past due 61-120 days past due 121-180 Over 180 days past due Total accounts receivable 2 5 10 25 The balance of the allowance for uncollectible accounts is $520 on December 31, before any adjustments. (a) What amount of bad debts expense will LaFond report in its income statement for the year? $ (b) Use the financial statement effects template to record LaFond's bad debts expense for the year. Use negative signs with your answers, when appropriate. Balance Sheet Transaction Record bad debts expense Noncash Cash Asset + Assets Contributed Earned Liabilities + Capital + Capital (c) What is the balance of accounts receivable on it December 31 balance sheet? Revenue Income Statement - Expenses Net Income -
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.
Allowance for bad debts: When a company is not sure of collecting it's receivable then it create an allowance for bad dents accounts.
By creating it Bad debt expense are booked and allowance for bad debts account is created.
Bad debt account has debit balance and allowance for bad debt account has credit balance.
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