Assume That This Company's Bad Debts Are Estimated and Recorded

question 165

Essay

Assume that this company's bad debts are estimated and recorded as 1.5% of credit sales.
On December 31,of the current year,a company's unadjusted trial balance revealed the following: accounts receivable of $185,600; sales revenue of $1,280,000; (75% were on credit) and allowance for doubtful accounts of $1,600 (credit balance).
a.Show how accounts receivable and the allowance for doubtful accounts would appear on the balance sheet after adjustment.
b.Prepare the entry to write off a $1,500 account receivable on January 1 of the next year.
c.Show how accounts receivable and the allowance for doubtful accounts would appear on the balance sheet immediately after writing off the account in part 2.

---

Definitions:

Equivalent Annual Costs

A financial analysis method to determine the annual cost of owning, operating, and maintaining an asset over its entire life.

Use of Cash

Describes how a company spends its cash, encompassing operational expenses, investment activities, and financing activities.

Accounts Receivable

Owed sums to a corporation by its customers for commodities or services furnished or taken advantage of, with the payment still forthcoming.

Tax Shield

A reduction in taxable income for an individual or corporation achieved through claiming allowable deductions such as interest on loans.