Effect of doubtful accounts on net income During its first year of operations, Mack's Plumbing Supply Co. had sales of $450,000, wrote off $7,200 of accounts as uncollectible using the direct write-off method, and reported net income of $49,500. Determine what the net income would have been if the allowance method had been used and the company estimated that 2% of sales would be uncollectible. 9,000 X Feedback Check My Work Under the direct write-off method, Bad Debt Expense is recorded when the customer's account is determined to be worthless and written off. There i is no adjusting entry at year-end to record estimated bad debt. To compute net income using the allowance method, first compute net income before write-off of accounts associated with the bad debt expense. Then determine how an amount estimated for Bad Debt Expense based on a percent of sales, would affect that net income.

Effect of doubtful accounts on net income During its first year of operations, Mack's Plumbing Supply Co. had sales of $450,000, wrote off $7,200 of accounts as uncollectible using the direct write-off method, and reported net income of $49,500. Determine what the net income would have been if the allowance method had been used and the company estimated that 2% of sales would be uncollectible. 9,000 X Feedback Check My Work Under the direct write-off method, Bad Debt Expense is recorded when the customer's account is determined to be worthless and written off. There i is no adjusting entry at year-end to record estimated bad debt. To compute net income using the allowance method, first compute net income before write-off of accounts associated with the bad debt expense. Then determine how an amount estimated for Bad Debt Expense based on a percent of sales, would affect that net income.

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter9: Receivables

Section: Chapter Questions

Problem 17E: Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of...

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Martel Co. has 320,000 in Accounts Receivable on December 31, 20-1, the end of its first year of operations. The business is new, so it has no prior experience with uncollectible accounts. In Martels overall industry, the percentage of uncollectible accounts receivable is about 3%. For companies similar to Martel in size and operations, the percentage is about 5%. Martel decides to use the overall industry experience as the basis for its estimate of uncollectible accounts. Prepare the adjusting entry on December 31, 20-1 for Martel Co.s uncollectible accounts.
At the end of 20-3, Martel Co. had 410,000 in Accounts Receivable and a credit balance of 300 in Allowance for Doubtful Accounts. Martel has now been in business for three years and wants to base its estimate of uncollectible accounts on its own experience. Assume that Martel Co.s adjusting entry for uncollectible accounts on December 31, 20-2, was a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts of 25,000. (a) Estimate Martels uncollectible accounts percentage based on its actual bad debt experience during the past two years. (b) Prepare the adjusting entry on December 31, 20-3, for Martel Co.s uncollectible accounts.
Determining Bad Debt Expense Using the Aging Method At the beginning of the year, Tennyson Auto Parts had an accounts receivable balance of $31,800 and a balance in the allowance for doubtful accounts of $2,980 (credit). During the year, Tennyson had credit sales of $624,300, collected accounts receivable in the amount of $602,700, wrote off $18,600 of accounts receivable, and had the following data for accounts receivable at the end of the period: Required: 1. Determine the desired post adjustment balance in allowance for doubtful accounts. 2. Determine the balance in allowance for doubtful accounts before the bad debt expense adjusting entry is posted. 3. Compute bad debt expense. 4. Prepare the adjusting entry to record bad debt expense.
Tanke Company reported net income on the year-end financial statements of $850,200. However, errors in inventory were discovered after the reports were issued. If inventory was overstated by $21,000, how much net income did the company actually earn?
Shetland Company reported net income on the year-end financial statements of $125,000. However, errors in inventory were discovered after the reports were issued. If inventory was understated by $15,000, how much net income did the company actually earn?
Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31: a. Journalize the write-offs under the direct write-off method. b. Journalize the write-offs under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded 5,250,000 of credit sales during the year. Based on past history and industry averages, % of credit sales are expected to be uncollectible. c. How much higher (lower) would Casebolt Companys net income have been under the direct write-off method than under the allowance method?
Accounts Receivable Balance Hart Inc. began the year with $315,700 of accounts receivable. During the year, Hart sold a considerable amount of merchandise on credit and collected $2,427,000 of its credit sales. At the end of the year, the accounts receivable balance is $16,800 lower than the beginning balance. Required: Calculate the amount of credit sales during the period.
UNCOLLECTIBLE ACCOUNTSPERCENTAGE OF SALES AND PERCENTAGE OF RECEIVABLES At the completion of the current fiscal year ending December 31, the balance of Accounts Receivable for Yangs Gift Shop was 30,000. Credit sales for the year were 355,200. REQUIRED Make the necessary adjusting entry in general journal form under each of the following assumptions. Show calculations for the amount of each adjustment and the resulting net realizable value. 1. Allowance for Doubtful Accounts has a credit balance of 330. (a) The percentage of sales method is used and bad debt expense is estimated to be 2% of credit sales. (b) The percentage of receivables method is used and an analysis of the accounts produces an estimate of 6,950 in uncollectible accounts. 2. Allowance for Doubtful Accounts has a debit balance of 400. (a) The percentage of sales method is used and bad debt expense is estimated to be 1.5% of credit sales. (b) The percentage of receivables method is used and an analysis of the accounts produces an estimate of 5,685 in uncollectible accounts.
ffect of Doubtful Accounts on Net Income During its first year of operations, Mack’s Plumbing Supply Co. had sales of $450,000, wrote off $7,200 of accounts as uncollectible using the direct write-off method, and reported net income of $49,500. Determine what the net income would have been if the allowance method had been used, and the company estimated that 1 3/4% of sales would be uncollectible.$
Effect of Doubtful Accounts on Net Income During its first year of operations, Mack’s Plumbing Supply Co. had sales of $320,000, wrote off $5,100 of accounts as uncollectible using the direct write-off method, and reported net income of $35,200. Determine what the net income would have been if the allowance method had been used, and the company estimated that 1 3/4% of sales would be uncollectible.$
A company has an opening credit balance in Allowance for Doubtful Accounts of $1,500. Its sales for the year total $400,000. Management estimates that 1% of sales are uncollectible. What is the balance of the Allowance for Doubtful Accounts at the end of the year using the income statement method? a. 4,000 b. 2,500 c. 5,500 d. none of the above
Effect of doubtful accounts on net income During its first year of operations, Mack's Plumbing Supply had sales of $390,000, wrote off $6,000 of accounts as uncollectible using the direct write-off method, and reported net income of $42,900. Assume that during the second year of operations Mack's Plumbing Supply had sales of $468,000, wrote off $7,200 of accounts as uncollectible using the direct write-off method, and reported net income of $46,800. a. Determine what net income would have been in the second year if the allowance method (using 1.25% of sales) had been used in both the first and second years. fill in the blank 1 of 25 b. Determine what the balance of the allowance for doubtful accounts would have been at the end of the second year if the allowance method had been used in both the first and second years. If required, use the minus sign to indicate a "debit" balance. fill in the blank 2 of 25