Question

Big Company reported the following on its December 31, 2019 balance sheet (000’s omitted): Accounts Receivable,...

Big Company reported the following on its December 31, 2019 balance sheet

(000’s omitted):

Accounts Receivable, net of allowance for doubtful accounts of $462                           $1,788

The company makes its adjusting entry for bad debts at the end of the year. During 2020, cash collections were $3,432. In addition, $368 in accounts receivable were written off and $3 was collected from an account written off in 2018. An aging of accounts receivable reveals the following:

Age

Group

Amount

Estimated % Uncollectible

current

          880

5%

31-60

          550

14%

61-90

          440

50%

91-120

          220

75%

121+

         110

90%

        2,200

1) What were the credit sales during 2020?

2) If the company records bad debts based on the aging analysis, what is the 12/31/20 adjusting entry? Net Realizable Value of Accounts Receivable (NRV)12/31/20?  

3) If the company records bad debts as 12.0% of credit sales, what is the 12/31/20 adjusting entry? NRV of A/R?

PLEASE show work and adjusted journal entries

Homework Answers

Answer #1

As per Standards of Accounting proviosion should be recognised When

A) when enterprise has a present obligation as a result of past event

B) Reliable estimate can be made

How Provision entries wil be

Every year end

Provison of bad and dubt full account a/c Dr

Accounts Receivables A/c Cr

On occuring of bad bebt - Actual

Bad bebts account Dr

Proviion of bad bebts Cr

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