On December 31, 2014, Extreme Fitness has adjusted balances of $800,000 in Accounts Receivable and $55,000 in Allowance for Doubtful Accounts. On January 2, 2015, the company learnsthat certain customer accounts are not collectible, so management authorizes a write-off of theseaccounts totaling $10,000.a. Show how the company would have reported its receivable accounts on December 31, 2014.As of that date, what amount did Extreme Fitness expect to collect?b. Prepare the journal entry to write off the accounts on January 2, 2015.c. Assuming no other transactions occurred between December 31, 2014, and January 3, 2015,show how Extreme Fitness would have reported its receivable accounts on January 3, 2015.As of that date, what amount did Extreme Fitness expect to collect? Has this changed fromDecember 31, 2014? Explain why or why not
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.
On December 31, 2014, Extreme Fitness has adjusted balances of $800,000 in
that certain customer accounts are not collectible, so management authorizes a write-off of these
accounts totaling $10,000.
a. Show how the company would have reported its receivable accounts on December 31, 2014.
As of that date, what amount did Extreme Fitness expect to collect?
b. Prepare the
c. Assuming no other transactions occurred between December 31, 2014, and January 3, 2015,
show how Extreme Fitness would have reported its receivable accounts on January 3, 2015.
As of that date, what amount did Extreme Fitness expect to collect? Has this changed from
December 31, 2014? Explain why or why not
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