Prepare a Schedule of Realized and Unrealized Profits for 2018

question 16

Essay

Prepare a Schedule of Realized and Unrealized Profits for 2018 and 2019 for both companies. Show your figures before and after tax.

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Definitions:

Bad Debts Expense

The cost associated with accounts receivable that a company does not expect to collect because customers default on payments.

Direct Write-off Method

A method where uncollectible accounts receivable are written off directly against income at the time they are deemed to be uncollectible.

Uncollectible Accounts

Accounts receivable deemed uncollectible by a business, representing money owed by customers that is unlikely to be paid and usually written off as an expense.

Expense Recognition Principle

An accounting guideline stating that expenses should be recorded in the same period as the revenues they help to generate.