Thế Glasser Company had balances in accounts receivable $280, and in the allowance for bad debts account of $20,000 as of the end of 2017. In the next two years the following results occurred: Year 2018 Credit Sales $2,900,000 $3,500,000 Collections $2,710,000 $3,219,000 Writeoffs $ 86,000 $102,000 2019 It is estimated that bad debts will amount to 4% of credit sales. A. Given GAAP and IRS regulations, determine what would be shown on the income statement and the tax form for bad debts for 2019. Also show what would be reported on the balance sheet as of the end of 2019 assuming that the company utilizes a "full presentation," i.e. includes`the appropriate contra account. 2019 Optional Worksheet Space (Not to be graded) Income 2019 Statement Tax Form Balance Sheet Presentation: B. Calculate the number of days sales that there are in accounts receivable as of the end of 2018 and 2019. Use year-end amounts for AR (i.e., no averages), and assume a 365-day year. Note: Number of Days Sales = (Gross AR/Sales) x 365 2018 2019 c. For 2019, how much of the dollar growth in gross accounts receivable is due to the growth in sales? How much is due to a change in the speed of collections? Sales Growth Change In Speed of Collections

Thế Glasser Company had balances in accounts receivable $280, and in the allowance for bad debts account of $20,000 as of the end of 2017. In the next two years the following results occurred: Year 2018 Credit Sales $2,900,000 $3,500,000 Collections $2,710,000 $3,219,000 Writeoffs $ 86,000 $102,000 2019 It is estimated that bad debts will amount to 4% of credit sales. A. Given GAAP and IRS regulations, determine what would be shown on the income statement and the tax form for bad debts for 2019. Also show what would be reported on the balance sheet as of the end of 2019 assuming that the company utilizes a "full presentation," i.e. includes`the appropriate contra account. 2019 Optional Worksheet Space (Not to be graded) Income 2019 Statement Tax Form Balance Sheet Presentation: B. Calculate the number of days sales that there are in accounts receivable as of the end of 2018 and 2019. Use year-end amounts for AR (i.e., no averages), and assume a 365-day year. Note: Number of Days Sales = (Gross AR/Sales) x 365 2018 2019 c. For 2019, how much of the dollar growth in gross accounts receivable is due to the growth in sales? How much is due to a change in the speed of collections? Sales Growth Change In Speed of Collections

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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

The Glasser Company had balances in accounts receivable of $280,000 and in the allowance for bad debts account of $20,000 as of the end of 2017. In the next two years, the following results occurred:

| Year | Credit Sales | Collections | Writeoffs |
|------|--------------|-------------|-----------|
| 2018 | $2,900,000 | $2,710,000 | $86,000 |
| 2019 | $3,500,000 | $3,219,000 | $102,000 |

It is estimated that bad debts will amount to 4% of credit sales.

**A. Given GAAP and IRS regulations, determine what would be shown on the income statement and the tax form for bad debts for 2019. Also, show what would be reported on the balance sheet as of the end of 2019 assuming that the company utilizes a “full presentation,” i.e., includes the appropriate contra account.**

*2019 Income Statement*

*2019 Tax Form*

*Balance Sheet Presentation:*

(Optional Worksheet Space - Not to be graded)

---

**B. Calculate the number of days sales that there are in accounts receivable as of the end of 2018 and 2019. Use year-end amounts for AR (i.e., no averages), and assume a 365-day year. Note: Number of Days Sales = (Gross AR/Sales) x 365**

*2018*

*2019*

---

**C. For 2019, how much of the dollar growth in gross accounts receivable is due to the growth in sales? How much is due to a change in the speed of collections?**

*Sales Growth*

*Change in Speed of Collections*

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