Abundant Returns
This Company Sells Its Merchandise Only on Credit

question 44

Essay

Abundant Returns
This company sells its merchandise only on credit.The following data are available at December 31,2012.
$\begin{array}{ll}\text {Sales } &\$ 411,000 \\\text { Sales returns and allowances} &12,000 \\\text { Account s receivable at January 1,2012 } &89,000 \\\text { Allowance for doubtfil accounts at January 1, 2012 } &4,100 \\\text { Cash collections during 2012 } &385,100 \\\text {Accountswritten off as uncollected during 2012 } &3,600\end{array}$
-Refer to Abundant Returns.The firm estimates that bad debts could be 2% of net sales.
A) What amount will the company recognize as bad debts expense for the year?
B) Assume that the company has a balence of Accounts Receivable of $\$ 108,900$ , and an Allowance for Doubtful Accounts of $\$ 820$ . What will be the net realizable value once the adjustment from (Part $A)$ is made?

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Definitions:

Profit Maximization

The method through which a company identifies the pricing and production quantity that yields the highest profit.

Human Capital

The skill set, knowledge base, and experiential accumulation found in people or populations, looked at through their financial value or cost burden to a company or a country.

Demand For Female Labor

The desire or need for workforces comprised of women, often discussed in terms of how economic, social, and policy changes affect employment opportunities for females.

Male Labor

The segment of the workforce comprising men, often analyzed in demographic and economic studies.