Financial Accounting
9th Edition
ISBN: 9781259738692
Author: Libby
Publisher: MCG
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Chapter 6, Problem 6.3P
Determining
Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectibility is (a) 3 percent, (b) 9 percent, and (c) 28 percent, respectively.
At December 31, 2014 (end of the current accounting year), the
| B. Brown—Account Receivable | ||||
| Date | Explanation | Debit | Credit | Balance |
| 3/11/2013 | Sale | 13,000 | 13,000 | |
| 6/30/2013 | Collection | 3,000 | 10,000 | |
| 1/31/2014 | Collection | 3,800 | 6,200 | |
| D. Donalds—Account Receivable | ||||
| 2/28/2014 | Sale | 21,000 | 21,000 | |
| 4/15/2014 | Collection | 8,000 | 13,000 | |
| 11/30/2014 | Collection | 6,000 | 7,000 | |
| N. Napier—Account Receivable | ||||
| 11/30/2014 | Sale | 8,000 | 8,000 | |
| 12/15/2014 | Collection | 1,000 | 7,000 | |
| S. Strothers—Account Receivable | ||||
| 3/2/2012 | Sale | 4,000 | 4,000 | |
| 4/15/2012 | Collection | 4,000 | -0- | |
| 9/1/2013 | Sale | 9,000 | 9,000 | |
| 10/15/2013 | Collection | 4,500 | 4,500 | |
| 2/1/2014 | Sale | 21,000 | 25,500 | |
| 3/1/2014 | Collection | 5,000 | 20,500 | |
| 12/31/2014 | Sale | 4,000 | 24,500 | |
| T. Thomas—Account Receivable | ||||
| 12/30/2014 | Sale | 4,000 | 4,000 | |
Required:
- 1. Compute the total accounts receivable in each age category.
- 2. Compute the estimated uncollectible amount for each age category and in total.
- 3. Give the
adjusting entry for bad debt expense at December 31, 2014. - 4. Show how the amounts related to accounts receivable should be presented on the 2014 income statement and
balance sheet .
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Students have asked these similar questions
Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each
accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is
aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more
than one year past due. Experience has shown that for each age group, the average loss rate on the amount
of the receivable at year-end due to uncollectibility is (a) 4 percent, (b) 10 percent, and (c) 29 percent,
respectively.
At December 31, 2022 (end of the current accounting year), the Accounts Receivable balance was $49,800
and the Allowance for Doubtful Accounts balance was $990 (credit). In determining which accounts have
been paid, the company applies collections to the oldest sales first. To simplify, only five customer accounts
are used; the details of each on December 31, 2022, follow:
B. Brown-Account Receivable
Date Explanation Debit Credit Balance
03/11/2021…
Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting
year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three
time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has
shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectibility is
(a) 2 percent. (b) 9 percent, and (c) 29 percent, respectively.
At December 31, 2022 (end of the current accounting year), the Accounts Receivable balance was $50,000 and the
Allowance for Doubtful Accounts balance was $1,030 (credit). In determining which accounts have been paid, the
company applies collections to the oldest sales first. To simplify, only five customer accounts are used; the details of each
on December 31, 2022, follow:
B. Brown-Account
Date Explanation Debit
03/11/2021 Sale
13,300
06/30/2021…
Problem is in the first attachment and the question that needs to be answered is in the second screenshot/
Chapter 6 Solutions
Financial Accounting
Ch. 6 - Prob. 1QCh. 6 - What is gross profit or gross margin on sales? In...Ch. 6 - What is a credit card discount? How does it affect...Ch. 6 - Prob. 4QCh. 6 - Prob. 5QCh. 6 - Differentiate accounts receivable from notes...Ch. 6 - Which basic accounting principle is the allowance...Ch. 6 - Using the allowance method, is bad debt expense...Ch. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - Prob. 11QCh. 6 - Prob. 12QCh. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Briefly explain how the total amount of cash...Ch. 6 - Prob. 16QCh. 6 - Sales discounts with terms 2/10, n/30 mean: a. 10...Ch. 6 - Gross sales total 300,000, one-half of which were...Ch. 6 - A company has been successful in reducing the...Ch. 6 - When a company using the allowance method writes...Ch. 6 - You have determined that Company X estimates bad...Ch. 6 - Prob. 6MCQCh. 6 - Which of the following is not a step toward...Ch. 6 - When using the allowance method, as bad debt...Ch. 6 - Which of the following best describes the proper...Ch. 6 - Prob. 10MCQCh. 6 - Prob. 6.1MECh. 6 - Prob. 6.2MECh. 6 - Recording Bad Debts Prepare journal entries for...Ch. 6 - Prob. 6.4MECh. 6 - Determining the Effects of Credit Policy Changes...Ch. 6 - Prob. 6.6MECh. 6 - Prob. 6.7MECh. 6 - Prob. 6.1ECh. 6 - Reporting Net Sales with Credit Sales, Sales...Ch. 6 - Reporting Net Sales with Credit Sales, Sales...Ch. 6 - Determining the Effects of Credit Sales, Sales...Ch. 6 - Prob. 6.5ECh. 6 - Reporting Bad Debt Expense and Accounts Receivable...Ch. 6 - Recording Bad Debt Expense Estimates and...Ch. 6 - Recording Bad Debt Expense Estimates and...Ch. 6 - Prob. 6.9ECh. 6 - Prob. 6.10ECh. 6 - Computing Bad Debt Expense Using Aging Analysis...Ch. 6 - Recording and Reporting a Bad Debt Estimate Using...Ch. 6 - Recording and Reporting a Bad Debt Estimate Using...Ch. 6 - Prob. 6.14ECh. 6 - Prob. 6.15ECh. 6 - Inferring Bad Debt Write-Offs and Cash Collections...Ch. 6 - Inferring Bad Debt Write-Offs and Cash Collections...Ch. 6 - Prob. 6.18ECh. 6 - Prob. 6.19ECh. 6 - Prob. 6.20ECh. 6 - Recording, Reporting, and Evaluating a Bad Debt...Ch. 6 - Prob. 6.22ECh. 6 - Prob. 6.23ECh. 6 - Interpreting tho Effects of Salos Declines and...Ch. 6 - Prob. 6.25ECh. 6 - Prob. 6.26ECh. 6 - Prob. 6.27ECh. 6 - Prob. 6.1PCh. 6 - Recording Bad Debts and Interpreting Disclosure of...Ch. 6 - Determining Bad Debt Expense Based on Aging...Ch. 6 - Preparing an Income Statement and Computing the...Ch. 6 - Prob. 6.5PCh. 6 - Prob. 6.6PCh. 6 - Prob. 6.7PCh. 6 - Reporting Net Sales and Expenses with Discounts,...Ch. 6 - Prob. 6.2APCh. 6 - Determining Bad Debt Expense Based on Aging...Ch. 6 - Prob. 6.4APCh. 6 - Prob. 6.5APCh. 6 - Prob. 6.1CONCh. 6 - Finding Financial Information Refer to the...Ch. 6 - Finding Financial Information Refer to the...Ch. 6 - Prob. 6.3CPCh. 6 - Prob. 6.4CPCh. 6 - Prob. 6.5CP
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