Problem 4 The Physical Therapy Center specializes in helping patients regain motor skills after serious accidents. The center has the following balances on December 31, before any adjustment: Sales - $1,500,000; A/R $110,000; Allowance for Uncollectible Accounts - $4,000 (debit). The center is considering two methods of estimating the allowance/bad debts, are the balance sheet approach and the income statement approach. Estimates relating to both are presented below: Aging of Accounts Receivable: Age Group Net yet due Amount of Receivable $. 60,000 26,000 16,000 8,000 0-60 days past due 61-120 days past due More than 120 days past due Total $ 110,000 2. 3. Calculate net accounts receivable. Est. % Uncollectible 4% 20% 30% 85% Physical Therapy Center is also considering using an estimate of 1% of sales to determine bad debts. Required: Part A and B are independent. Part A: Given the company uses the Balance Sheet Approach, complete the following. Estimate the amount of uncollectible receivables. Record the adjustment for uncollectible accounts on December 31. Part B. Given the company uses the Income Statement Approach, complete the following. 1. Estimate the amount of uncollectible receivables. 2. Record the adjustment for uncollectible accounts on December 31. 3. Calculate net accounts receivable.
Problem 4 The Physical Therapy Center specializes in helping patients regain motor skills after serious accidents. The center has the following balances on December 31, before any adjustment: Sales - $1,500,000; A/R $110,000; Allowance for Uncollectible Accounts - $4,000 (debit). The center is considering two methods of estimating the allowance/bad debts, are the balance sheet approach and the income statement approach. Estimates relating to both are presented below: Aging of Accounts Receivable: Age Group Net yet due Amount of Receivable $. 60,000 26,000 16,000 8,000 0-60 days past due 61-120 days past due More than 120 days past due Total $ 110,000 2. 3. Calculate net accounts receivable. Est. % Uncollectible 4% 20% 30% 85% Physical Therapy Center is also considering using an estimate of 1% of sales to determine bad debts. Required: Part A and B are independent. Part A: Given the company uses the Balance Sheet Approach, complete the following. Estimate the amount of uncollectible receivables. Record the adjustment for uncollectible accounts on December 31. Part B. Given the company uses the Income Statement Approach, complete the following. 1. Estimate the amount of uncollectible receivables. 2. Record the adjustment for uncollectible accounts on December 31. 3. Calculate net accounts receivable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 4
The Physical Therapy Center specializes in helping patients regain motor skills after serious accidents. The center
has the following balances on December 31, before any adjustment: Sales - $1,500,000, A/R-$110,000, Allowance
for Uncollectible Accounts - $4,000 (debit). The center is considering two methods of estimating the
allowance/bad debts, are the balance sheet approach and the income statement approach.
Estimates relating to both are presented below:
Aging of Accounts Receivable
Age Group
Amount of Receivable
$.60,000
26,000
16,000
8,000
2.
3.
Net yet due
0-60 days past due
61-120 days past due
More than 120 days past due
Total
$ 110,000
***********
Est. % Uncollectible
4%
20%
30%
85%
Physical Therapy Center is also considering using an estimate of 1% of sales to determine bad debts.
Required:
Part A and B are independent.
Part A: Given the company uses the Balance Sheet Approach, complete the following.
1. Estimate the amount of uncollectible receivables.
Record the adjustment for uncollectible accounts on December 31.
Calculate net accounts receivable.
Part B: Given the company uses the Income Statement Approach, complete the following.
1. Estimate the amount of uncollectible receivables.
2. Record the adjustment for uncollectible accounts on December 31,
3.
Calculate net accounts receivable.
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