Chapter 8 Receivables 417 Year of Origin of Accounts Receivable Written Off as U
ID: 2518193 • Letter: C
Question
Chapter 8 Receivables 417 Year of Origin of Accounts Receivable Written Off as Uncollectible Uncollectible Accounts Written Off 4,500 9,600 12,800 16,550 Year Sales $900,000 1,250,000 1,500,000 2,200,000 $4,500 3,000 $6,600 1,000 3,700 $8,100 1,500 4,300 $10,750 Instructions 1. Assemble the desired data, using the following column headings: Bad Debt Expense Increase Decrease) in Amount of Expense Expense Based on Balance of Allowance Account, Expense Actually Reported End of Year Year Estimate Experience during the first four years of operations indicated that the receivables be written off as uncollectible. Does the th uncol- were either collected within two years or had to estimate of 1% of sales appear to be reasonably close to the actual experience wi ectible accounts originating during the first two years? Explairn.Explanation / Answer
Requirement 1 : Assembly of desired data Bad-debts expense Year Sales Expense actually reported Expense based on estimate Increase (Decrease) in amount of expense Balance of allowance account, End of Year 1 900000 4500 9000 4500 4500 2 1250000 9600 12500 2900 7400 3 1500000 12800 15000 2200 9600 4 2200000 16550 22000 5450 15050 Requirement 2 Yes, 1% of Sales does appear to be reasonably close to the actual experience with uncollectible accounts originating during the first two years which can be evidenced from below mentioned calculations. Year Sales Expense actually reported Expense based on estimate Total Uncollectible originating from the year -A % of A to Sales 1 900000 4500 9000 8500 0.944 First two year 2 1250000 9600 12500 11800 0.944 3 1500000 12800 15000 4 2200000 16550 22000