The following information is available for Fess Company: Credit sales during 20X1 $ 150,000 Allowance for credit losses at December 31, 20X0 1,450 Accounts receivable deemed worthless and written off during 20X1 1,800 During 20X1, Fess estimated that its credit loss expense should be 1% of all credit sales. As a result of a review and aging of accounts receivable in early January 20X2, it has been determined that an allowance for credit losses of $1,600 is needed at December 31, 20X1. Required: What is the total amount
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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.
The following information is available for Fess Company:
| Credit sales during 20X1 | $ | 150,000 | |
| Allowance for credit losses at December 31, 20X0 | 1,450 | ||
| 1,800 | |||
During 20X1, Fess estimated that its credit loss expense should be 1% of all credit sales.
As a result of a review and aging of accounts receivable in early January 20X2, it has been determined that an allowance for credit losses of $1,600 is needed at December 31, 20X1.
Required:
- What is the total amount that Fess should record as credit loss expense for the year ended December 31, 20X1?
- Show the
journal entries affecting the Allowance for credit losses that Fess made during 20X1.
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