Allowance method: It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account. Percentage of sales method: Credit sales are recorded by debiting (increasing) accounts receivable account. The bad debts is a loss incurred out of credit sales, hence uncollectible accounts can be estimated as a percentage of credit sales or total sales. It is a method of estimating the bad debts (expected loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of net credit sale (or total sales) for a specific period. Under percentage of sales method, estimated bad debts would be treated as a bad debt expense of the particular period. the amount of (a) the addition to allowance for doubtful accounts and (b) the accounts written off for each of the four years.

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Answer 1

Question

Chapter 8, Problem 8.2CP

(1) (a)

To determine

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Percentage of sales method:

Credit sales are recorded by debiting (increasing) accounts receivable account. The bad debts is a loss incurred out of credit sales, hence uncollectible accounts can be estimated as a percentage of credit sales or total sales.

It is a method of estimating the bad debts (expected loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of net credit sale (or total sales) for a specific period. Under percentage of sales method, estimated bad debts would be treated as a bad debt expense of the particular period.

the amount of (a) the addition to allowance for doubtful accounts and (b) the accounts written off for each of the four years.

(2)

To determine

To advise: Person LJ, whether the estimate of ½ of 1% of credit sales appears reasonable.

(3)

To determine

To discuss: The action, which is required to determine the required balance in allowance for doubtful accounts by December 31, 2016, and suggest the possible changes for the recommended accounting for uncollectible receivables.

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Selected comparative financial statements of Korbin Company follow. Sales KORBIN COMPANY Comparative Income Statements For Years Ended December 31 2021 2020 $ 512,008 $ 392,240 2019 $ 272,200 Cost of goods sold 308,229 245,542 174,208 Gross profit 203,779 146,698 97,992 Selling expenses 72,705 54,129 35,930 Administrative expenses 46,081 34,517 22,593 Total expenses 118,786 88,646 58,523 Income before taxes .84,993 58,052 39,469 Income tax expense 15,809 11,901 8,012 Net income $ 69,184 $ 46,151 $ 31,457 KORBIN COMPANY Comparative Balance Sheets Assets Current assets Long-term investments Plant assets, net Total assets Liabilities and Equity Current liabilities Common stock Other paid-in capital Retained earnings December 31 2021 2020 2019 $ 54,370 0 $ 36,390 600 $ 48,645 3,870 99,436 90,776 53,339 Total liabilities and equity $ 153,806 $ 127,766 $ 105,854 $ 22,456 $ 19,037 $ 18,524 68,000 68,000 50,000 8,500 8,500 5,556 54,850 32,229 31,774 $ 153,806 $ 127,766 $ 105,854

Answer 2

Question

Chapter 8, Problem 8.2CP

(1) (a)

To determine

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Percentage of sales method:

Credit sales are recorded by debiting (increasing) accounts receivable account. The bad debts is a loss incurred out of credit sales, hence uncollectible accounts can be estimated as a percentage of credit sales or total sales.

It is a method of estimating the bad debts (expected loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of net credit sale (or total sales) for a specific period. Under percentage of sales method, estimated bad debts would be treated as a bad debt expense of the particular period.

the amount of (a) the addition to allowance for doubtful accounts and (b) the accounts written off for each of the four years.

(2)

To determine

To advise: Person LJ, whether the estimate of ½ of 1% of credit sales appears reasonable.

(3)

To determine

To discuss: The action, which is required to determine the required balance in allowance for doubtful accounts by December 31, 2016, and suggest the possible changes for the recommended accounting for uncollectible receivables.

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Answer 3

Question

Chapter 8, Problem 8.2CP

(1) (a)

To determine

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Percentage of sales method:

Credit sales are recorded by debiting (increasing) accounts receivable account. The bad debts is a loss incurred out of credit sales, hence uncollectible accounts can be estimated as a percentage of credit sales or total sales.

It is a method of estimating the bad debts (expected loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of net credit sale (or total sales) for a specific period. Under percentage of sales method, estimated bad debts would be treated as a bad debt expense of the particular period.

the amount of (a) the addition to allowance for doubtful accounts and (b) the accounts written off for each of the four years.

(2)

To determine

To advise: Person LJ, whether the estimate of ½ of 1% of credit sales appears reasonable.

(3)

To determine

To discuss: The action, which is required to determine the required balance in allowance for doubtful accounts by December 31, 2016, and suggest the possible changes for the recommended accounting for uncollectible receivables.

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Answer 4

Question

Chapter 8, Problem 8.2CP

(1) (a)

To determine

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Percentage of sales method:

Credit sales are recorded by debiting (increasing) accounts receivable account. The bad debts is a loss incurred out of credit sales, hence uncollectible accounts can be estimated as a percentage of credit sales or total sales.

It is a method of estimating the bad debts (expected loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of net credit sale (or total sales) for a specific period. Under percentage of sales method, estimated bad debts would be treated as a bad debt expense of the particular period.

the amount of (a) the addition to allowance for doubtful accounts and (b) the accounts written off for each of the four years.

(2)

To determine

To advise: Person LJ, whether the estimate of ½ of 1% of credit sales appears reasonable.

(3)

To determine

To discuss: The action, which is required to determine the required balance in allowance for doubtful accounts by December 31, 2016, and suggest the possible changes for the recommended accounting for uncollectible receivables.

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Answer 5

Chapter 8, Problem 8.2CP

(1) (a)

To determine

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Percentage of sales method:

Credit sales are recorded by debiting (increasing) accounts receivable account. The bad debts is a loss incurred out of credit sales, hence uncollectible accounts can be estimated as a percentage of credit sales or total sales.

It is a method of estimating the bad debts (expected loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of net credit sale (or total sales) for a specific period. Under percentage of sales method, estimated bad debts would be treated as a bad debt expense of the particular period.

the amount of (a) the addition to allowance for doubtful accounts and (b) the accounts written off for each of the four years.

(2)

To determine

To advise: Person LJ, whether the estimate of ½ of 1% of credit sales appears reasonable.

(3)

To determine

To discuss: The action, which is required to determine the required balance in allowance for doubtful accounts by December 31, 2016, and suggest the possible changes for the recommended accounting for uncollectible receivables.

Answer 6

Chapter 8, Problem 8.2CP

(1) (a)

To determine

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Percentage of sales method:

Credit sales are recorded by debiting (increasing) accounts receivable account. The bad debts is a loss incurred out of credit sales, hence uncollectible accounts can be estimated as a percentage of credit sales or total sales.

It is a method of estimating the bad debts (expected loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of net credit sale (or total sales) for a specific period. Under percentage of sales method, estimated bad debts would be treated as a bad debt expense of the particular period.

the amount of (a) the addition to allowance for doubtful accounts and (b) the accounts written off for each of the four years.

Answer 7

Chapter 8, Problem 8.2CP

(1) (a)

To determine

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Percentage of sales method:

Credit sales are recorded by debiting (increasing) accounts receivable account. The bad debts is a loss incurred out of credit sales, hence uncollectible accounts can be estimated as a percentage of credit sales or total sales.

It is a method of estimating the bad debts (expected loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of net credit sale (or total sales) for a specific period. Under percentage of sales method, estimated bad debts would be treated as a bad debt expense of the particular period.

the amount of (a) the addition to allowance for doubtful accounts and (b) the accounts written off for each of the four years.

Answer 8

(2)

To determine

To advise: Person LJ, whether the estimate of ½ of 1% of credit sales appears reasonable.

Answer 9

(2)

To determine

To advise: Person LJ, whether the estimate of ½ of 1% of credit sales appears reasonable.

Answer 10

(3)

To determine

To discuss: The action, which is required to determine the required balance in allowance for doubtful accounts by December 31, 2016, and suggest the possible changes for the recommended accounting for uncollectible receivables.

Answer 11

(3)

To determine

To discuss: The action, which is required to determine the required balance in allowance for doubtful accounts by December 31, 2016, and suggest the possible changes for the recommended accounting for uncollectible receivables.

Answer 12

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Answer 13

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Answer 15

Ch. 8 - What are the three classifications of receivables?Ch. 8 - Dans Hardware is a small hardware store in the...Ch. 8 - What kind of an account (asset, liability, etc.)...Ch. 8 - After the accounts are adjusted and closed at the...Ch. 8 - A firm has consistently adjusted its allowance...Ch. 8 - Which of the two methods of estimating...Ch. 8 - Neptune Company issued a note receivable to...Ch. 8 - Prob. 8DQ Ch. 8 - The maker of a 240,000, 6%, 90-day note receivable...Ch. 8 - The note receivable dishonored in Discussion...

Solution Summary: The author explains the allowance method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period.

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To advise: Person LJ, whether the estimate of ½ of 1% of credit sales appears reasonable.

To discuss: The action, which is required to determine the required balance in allowance for doubtful accounts by December 31, 2016, and suggest the possible changes for the recommended accounting for uncollectible receivables.

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