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:

Stockholders' Claim

The rights of shareholders to a company's assets, typically after debts have been paid.

Net Income

Net Income is the total profit of a company after all expenses, including taxes and operating costs, have been deducted from total revenue.

Dividends

Rephrased: Payments made by a corporation to its shareholders, usually as a distribution of profits.

Net Income

The concluding income of a company after removing the costs and taxes from its revenue.