Colorado Rocky Cookie Company offers credit terms to its customers. At the end o
ID: 2541830 • Letter: C
Question
Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2018, accounts receivable totaled $675,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $42,000 at the beginning of 2018 and $26,000 in receivables were written off during the year as uncollectible. Also, $2,200 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 10% to accounts receivable at the end of the year.
Required:
Explanation / Answer
Current assets Accounts receivables(Net) 6,07,500 675000 - 67500 Allowance for Uncollactoble Accounts 42,000 Less Bad debt written off (26,000) Cash received 2,200 Balance before adjustement 18,200 Bad debt for the year 49,300 Bad debt estimated at the end (10%) 67500