(Learning Objective 5: Evaluate collectibility using the allowance for uncollectibleaccounts) At the end of the current year (before adjusting entries), Autumn Corporation hada balance of $76,000 in Accounts Receivable and a credit balance of $11,000 in Allowance forUncollectible Accounts. Service revenue (all on credit) for the year totaled $490,000.RequirementsConsider each of the following two independent situations.1. Using the percent-of-sales method, calculate the amount of Uncollectible-Account Expenseif Autumn Corporation estimates its uncollectible-account expense using a rate of 2% ofcredit sales. What is the ending balance of the Allowance for Uncollectible-Accounts underthis scenario?2. Now assume that Autumn Corporation uses the aging-of-receivables method. AutumnCorporation estimates that its Allowance for Uncollectible Accounts should have a creditbalance of $21,000. Calculate the amount of its Uncollectible-Account Expense. What isthe ending balance of the Allowance for Uncollectible Accounts under this scenario?
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.
(Learning Objective 5: Evaluate collectibility using the allowance for uncollectible
accounts) At the end of the current year (before
a balance of $76,000 in
Uncollectible Accounts. Service revenue (all on credit) for the year totaled $490,000.
Requirements
Consider each of the following two independent situations.
1. Using the percent-of-sales method, calculate the amount of Uncollectible-Account Expense
if Autumn Corporation estimates its uncollectible-account expense using a rate of 2% of
credit sales. What is the ending balance of the Allowance for Uncollectible-Accounts under
this scenario?
2. Now assume that Autumn Corporation uses the aging-of-receivables method. Autumn
Corporation estimates that its Allowance for Uncollectible Accounts should have a credit
balance of $21,000. Calculate the amount of its Uncollectible-Account Expense. What is
the ending balance of the Allowance for Uncollectible Accounts under this scenario?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
