Barton Corporation Uses the Percent of Receivables Method

question 129

True/False

Barton Corporation uses the percent of receivables method. As of December 31, Year 1, prior to estimating uncollectible accounts expense, Barton's balance of accounts receivable was $68,900, the balance of allowance for doubtful accounts was $2,500, and total sales for Year 1 were $875,000. On December 31, Barton aged its receivables and determined the following:.
a)Barton will report a net realizable value of accounts receivable equal to $63,170 on its December 31, Year 1 balance sheet.b)Barton will report uncollectible accounts expense of $5,730 on its Year 1 income statement.c)The December 31 adjustment related to uncollectible accounts will increase total liabilities and decrease stockholders' equity by $3,230.d)The method Barton uses to account for uncollectible accounts is known as the balance sheet approach.e)Write-offs of uncollectible accounts in Year 2 will reduce Barton's net realizable value of receivables.

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Definitions:

End-Of-Month Payments

Payments that are due at the end of each month, commonly found in loan and lease agreements.

Finance Company

A business that provides loans to individuals or other businesses and generates profit from the interest on these loans.

Conditional Sale

A sales agreement that includes conditions that must be met before the sale is final and the property is transferred to the buyer.

Ordinary Annuity

A series of equal payments made at regular intervals over a specified period of time.