The credit manager of Sweet Sales Inc. has gathered the following information about the company's accounts receivable and credit losses during the current year. Net credit sales for the year Accounts receivable at year-end Uncollectible accounts receivable: Actually written off during the year Estimated portion of year-end receivables expected to prove uncollectible (per aging schedule) $91,000 84,000 $7,500,000 1,750,000 175,000 a. Uncollectible accounts expense is estimated at an amount equal to 2.5 percent of net credit sales. b. Uncollectible accounts expense is recognized by adjusting the balance in the Allowance for Doubtful Accounts to the amount indicated in the year-end aging schedule. The balance in the allowance account at the beginning of the current year was $25,000. (Consider the effect of the write-offs during the year on the balance in the Allowance for Doubtful Accounts.) c. The company uses the direct write-off method of accounting for urlcollectible accounts. Prepare one journal entry summarizing the recognition of uncollectible accounts expense for the entire year under each of the above independent assumptions. (If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.)
The credit manager of Sweet Sales Inc. has gathered the following information about the company's accounts receivable and credit losses during the current year. Net credit sales for the year Accounts receivable at year-end Uncollectible accounts receivable: Actually written off during the year Estimated portion of year-end receivables expected to prove uncollectible (per aging schedule) $91,000 84,000 $7,500,000 1,750,000 175,000 a. Uncollectible accounts expense is estimated at an amount equal to 2.5 percent of net credit sales. b. Uncollectible accounts expense is recognized by adjusting the balance in the Allowance for Doubtful Accounts to the amount indicated in the year-end aging schedule. The balance in the allowance account at the beginning of the current year was $25,000. (Consider the effect of the write-offs during the year on the balance in the Allowance for Doubtful Accounts.) c. The company uses the direct write-off method of accounting for urlcollectible accounts. Prepare one journal entry summarizing the recognition of uncollectible accounts expense for the entire year under each of the above independent assumptions. (If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.)
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter5: Sales And Receivables
Section: Chapter Questions
Problem 85APSA: Determining Bad Debt Expense Using the Aging Method At the beginning of the year, Tennyson Auto...
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Concept explainers
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.
Question
Transcribed Image Text:The credit manager of Sweet Sales Inc. has gathered the following information about the company's accounts receivable and credit
losses during the current year:
Net credit sales for the year
Accounts receivable at year-end
Uncollectible accounts receivable:
Actually written off during the year
Estimated portion of year-end receivables expected to
prove uncollectible (per aging schedule)
$91,000
84,000
$7,500,000
1,750,000
175,000
a. Uncollectible accounts expense is estimated at an amount equal to 2.5 percent of net credit sales.
b. Uncollectible accounts expense is recognized by adjusting the balance in the Allowance for Doubtful Accounts to the amount
indicated in the year-end aging schedule. The balance in the allowance account at the beginning of the current year was $25,000.
(Consider the effect of the write-offs during the year on the balance in the Allowance for Doubtful Accounts.)
c. The company uses the direct write-off method of accounting for urlcollectible accounts.
Prepare one journal entry summarizing the recognition of uncollectible accounts expense for the entire year under each of the above
independent assumptions. (If no entry is required for a transaction/event, select "No Journal entry required" in the first account
field.)
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