Wk 3 Assignment 1 5-24, 5-26
5-24 Determining account balances: % of revenue allowance method of accounting for uncollectible accounts
The following info pertains to Leslies’s Floor Store sales on account and accounts receivable: Account Receivable balance, January 1, 2012 $52,500
Allowance for doubtful accounts, January, 1, 2012 $4,725
Sales on account, 2012 $925,000
Cost of goods sold, 2012 $615,000
Collections of accounts receivable, 2012 $835,000
a. Compute the following amounts
1. Using the allowance method, the amount of uncollectible accounts expense for 2012
925,000 * 0.5 = bad debt of $4,625
2. Net realizable value of receivables at the end of 2012
$52,000 – 4,725 = $47,775
b. Explain why the uncollectible accounts expense amount is different from the amount that was written off as uncollectible
The amounts are different because when they do the write off amount it is an estimated amount on what they think would probably written off and not received from the customer
5-26 Determination of account balances - % of receivables allowance method of accounting for uncollectible accounts
During the 1st year of operation, 2012, Martin’s Appliance recognized $292,000 of service revenue on account. At the end of 2012, the accounts receivable balance was $57,400. Even though this is the first in business, the owner believes he will collect all but about 4% of the ending balance
a. What amount of cash was collected by Martin’s during 2012?
b. Assuming the use of an allowance system to account for uncollectible accounts, what amount should Martin record as uncollectible accounts expense in 2012?
$57,400 * .04 = $2,296
c. What is the net realizable value of receivables at the end of 2012?
$57,400 – $2,296 = $55,104
d. Show the effects of the above transactions on the financial statements by recording appropriate amounts in a horizontal statements model. When you record amounts in the...