On January 1, Year 2, Grande Company had a $76,000 balance in the Accounts Receivable account and a $4,000 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $215,000 recognized service revenue on account. The company collected $271,100 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. The amount of uncollectible accounts expense recognized on the Year 2 Income statement is: Multiple Choice O O O $760. $2,150. $2.711. $2,100.
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.
When a company is unable to collect money owed to them, it incurs an expense known as "Estimated Uncollectible Expense" or "Bad Debt Expense." This refers to an accounting concept related to accounts receivable. It could be due to various reasons such as customers not paying their invoices, becoming insolvent, or defaulting on credit. In other words, it is the amount of revenue that a company does not expect to receive from its customers.
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