Please explain how to determine the effect on the balance sheet formula given the below problem. During the current year, Sun Electronics, Incorporated, recorded credit sales of $5,000,000. Based on prior experience, it estimates a 2 percent bad debt rate on credit sales. a. On November 13 of the current year, an account receivable for $98,000 from a prior year was determined to be uncollectible and was written off. b. At year-end, the appropriate bad debt expense adjustment was recorded for the current year. Required: Show the effects of the above transactions on the following categories: Assets, Liabilities, and Stockholders' Equity. Indicate the accounts affected and enter decreases to account categories with a minus sign. Transaction Assets Liabilities Stockholders’ Equity a. Allowance for doubtful accounts 98,000 Allowance for doubtful accounts 100,000 Cost of goods sold 4,902,000 Accounts receivable 98,000 b. Allowance for doubtful accounts 100,000
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.
Please explain how to determine the effect on the balance sheet formula given the below problem.
During the current year, Sun Electronics, Incorporated, recorded credit sales of $5,000,000. Based on prior experience, it estimates a 2 percent
a. On November 13 of the current year, an account receivable for $98,000 from a prior year was determined to be uncollectible and was written off.
b. At year-end, the appropriate bad debt expense adjustment was recorded for the current year.
Required:
Show the effects of the above transactions on the following categories: Assets, Liabilities, and Stockholders' Equity. Indicate the accounts affected and enter decreases to account categories with a minus sign.
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