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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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.

Expert Solution & Answer

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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 14

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Answer 15

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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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