Uncollectible Accounts--Two Methods
at the End of the Year the Unadjusted

question 37

Essay

Uncollectible accounts--two methods
At the end of the year the unadjusted trial balance of Angel Provisions included the following accounts:
$\begin{array}{|l|l|l|}\hline & \text { Debit } & \text { Credit } \\\hline \text { Sales (80\% represent credit sales } & & \$ 780,575 \\\hline \text { Accounts Receivable } & \$ 101,475 & \\\hline \text { Allowance for Impairment } & & \$ 1,218 \\\hline\end{array}$ (a.) If Angel uses the balance sheet approach to estimate uncollectible accounts expense, and aging the accounts receivable indicates the estimated uncollectible portion to be $6,075, what will the uncollectible accounts expense for the year be?
(b.) If the income statement approach to estimating uncollectible accounts expense is followed, and uncollectible accounts expense is estimated to be 1% of net credit sales, what is the amount of uncollectible accounts expense for the year?

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Definitions:

Invested Assets

Assets that are purchased or acquired for the purpose of generating income or profit for the business.

Markup Percentage

A percentage increase on the buying price of items intended to account for operational expenses and ensure earnings.

Selling and Administrative Costs

Expenses related to the selling of products or services and the general administrative activities of a business.

Markup Percentage

The proportion added onto the purchase price of goods to accommodate for overhead costs and gain profit.