Over the past five years, a company had average annual credit sales of $320,000 and an average annual net write-offs of $2,000. Credit sales in the current year are $300,000. Using the percentage of credit sales method, what should the company record as an estimate of bad debt expense? Multiple Choice $2,000 $1,875 None of the other alternatives are correct

Over the past five years, a company had average annual credit sales of $320,000 and an average annual net write-offs of $2,000. Credit sales in the current year are $300,000. Using the percentage of credit sales method, what should the company record as an estimate of bad debt expense? Multiple Choice $2,000 $1,875 None of the other alternatives are correct

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter6: Cash And Receivables

Section: Chapter Questions

Problem 7RE: McKinney Co. estimates its uncollectible accounts as a percentage of credit sales. McKinney made...

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Aerospace Electronics reports $567,000 in credit sales for 2018 and $632,500 in 2019. They have a $499,000 accounts receivable balance at the end of 2018, and $600,000 at the end of 2019. Aerospace uses the income statement method to record bad debt estimation at 5% during 2018. To manage earnings more favorably, Aerospace changes bad debt estimation to the balance sheet method at 7% during 2019. A. Determine the bad debt estimation for 2018. B. Determine the bad debt estimation for 2019. C. Describe a benefit to Aerospace Electronics in 2019 as a result of its earnings management.
Doer Company reports year-end credit sales in the amount of $390,000 and accounts receivable of $85,500. Doer uses the income statement method to report bad debt estimation. The estimation percentage is 3.5%. What is the estimated balance uncollectible using the income statement method? A. $13,650 B. $2,992.50 C. $136,500 D. $29,925
Tonis Tech Shop has total credit sales for the year of 170,000 and estimates that 3% of its credit sales will be uncollectible. Allowance for Doubtful Accounts has a credit balance of 275. Prepare the adjusting entry at year-end for the estimated bad debt expense. (a) Based on an aging of its accounts receivable, Kyles Cyclery estimates that 3,200 of its year-end accounts receivable will be uncollectible. Allowance for Doubtful Accounts has a debit balance of 280 at year-end. Prepare the adjusting entry at year-end for the estimated uncollectible accounts.
Michelle Company reports $345,000 in credit sales and $267,500 in accounts receivable at the end of 2019. Michelle currently uses the income statement method to record bad debt estimation at 4%. To manage earnings more efficiently, Michelle changes bed debt estimation to the balance sheet method at 4%. How much is the difference in net income between the income statement and balance sheet methods? A. $3,100 B. $13,800 C. $10,700 D. $77,500
At the end of 20-3, Martel Co. had 410,000 in Accounts Receivable and a credit balance of 300 in Allowance for Doubtful Accounts. Martel has now been in business for three years and wants to base its estimate of uncollectible accounts on its own experience. Assume that Martel Co.s adjusting entry for uncollectible accounts on December 31, 20-2, was a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts of 25,000. (a) Estimate Martels uncollectible accounts percentage based on its actual bad debt experience during the past two years. (b) Prepare the adjusting entry on December 31, 20-3, for Martel Co.s uncollectible accounts.
McKinney Co. estimates its uncollectible accounts as a percentage of credit sales. McKinney made credit sales of 1,500,000 in 2019. McKinney estimates 2.5% of its sales will be uncollectible. Prepare the journal entry to record bad debt expense for McKinney at the end of 2019.
Jars Plus recorded $861,430 in credit sales for the year and $488,000 in accounts receivable. The uncollectible percentage is 2.3% for the income statement method, and 3.6% for the balance sheet method. A. Record the year-end adjusting entry for 2018 bad debt using the income statement method. B. Record the year-end adjusting entry for 2018 bad debt using the balance sheet method. C. Assume there was a previous debit balance in Allowance for Doubtful Accounts of $10,220, record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method. D. Assume there was a previous credit balance in Allowance for Doubtful Accounts of $5,470, record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method.
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.
Theon Company has $4,000,000 of sales and $200,000 of accounts receivable for the year. The company estimates 2% of its sales will become uncollectible. If Allowance for Doubtful Accounts has a $900 credit balance, the adjustment to record uncollectible accounts for the period will require a debit to bad debt expense for: Group of answer choices $79,100 $80,000 $3,100 $80,900
A company's management estimates that 2.5% of net credit sales will be uncollectible net credit sales are 115,000 what will the amount of bad debt expense be reported on the income statement
Matu Inc. has the following information during the year: sales 2,000,000sales discounts 30,000Accounts receivable, beginning 250,000collections from all customers 2,100,000allowance for doubtful accounts, beginning 5,000customer accounts written off 2,000 If all sales are credit sales, and privision for bad debts is equal to 2% of net credit sales, compute the following:- Bad debt expense- Net relizable value, ending If 20% of sales are cash sales, and provision for bad debts is equal to 2% of net credit sales, compute the following:- Bad debt expense- Net reliazable value, ending 30% of sales are cash sales, provision for bad debts is equal to 2% of net credit sales, and Php10,000 from collections from customers are recovery of bad debt previously written off, compute the following:- Bad debt expense- Net reliazable value, ending
Gilmore Electronics had the following data for a recent year:Cash sales $135,000Credit sales 512,000Accounts receivable determined to be uncollectible 9,650The firm’s estimated rate for bad debts is 2.2% of credit sales Required:1. Prepare the journal entry to write off the uncollectible accounts.2. Prepare the journal entry to record the estimate of bad debt expense.3. If Gilmore had written off $3,000 of receivables as uncollectible during the year, how much would bad debt expense reported on the income statement have changed?4. CONCEPTUAL CONNECTION If Gilmore’s estimate of bad debts is correct (2.2% of credit sales) and the gross margin is 20%, by how much did Gilmore’s income from operationsincrease assuming $150,000 of the sales would have been lost if credit sales were not offered?