Historically, your company has calculated bad debts using an aging of accounts receivable. Near the end of the fiscal year, the company is in a cash crunch and needs to borrow money from the bank, using accounts receivable as collateral. The owner of the company knows that many of the accounts receivable are more than 90 days past due, resulting in net receivables equal to only 80% of total receivables. You are asked by the owner asks you to change the method of estimating bad debts to a flat 3% of receivables. What should you do?
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Historically, your company has calculated
You are asked by the owner asks you to change the method of estimating bad debts to a flat 3% of receivables. What should you do?
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- You are the accountant for Black Cat Ltd. (BCL) and you have just finished the aging analysis of accounts receivable. You have estimated that $5,000 of the current $98,000 of A/R will be uncollectible. The allowance for doubtful accounts had a $400 credit balance at year-end before adjustment. What amount of bad debts would you expect to see on BCL's income statement for the year? a. $0 b. $4,600 c. $5,000 d. $5,400A clothing wholesaler is experiencing cash flow problems for several years due to its accounts receivables. Some of the amounts due by debtors are irrecoverable and the company is contemplating creating a provision for doubtful debts. (d) The financial year end of the clothing wholesaler is 31 December. You have been provided the following information by the management of the company: YEAR Bad debts written off year to 31 December Accounts receivable at 31 December after bad debts written off Percentage allowance for doubtful debts 1 Use any amount between RM2, 000 and RM3, 000 Use any amount between RM50, 000 and RM60, 000 3 2 Use any amount between RM2, 000 and RM3, 000 Use any amount between RM80, 000 and RM85, 000 5 3 Use any amount between RM1, 000 and RM2, 500 Use any amount between RM65, 000 and RM75, 000 2 4 Use any amount between RM2, 800 and RM5, 500 Use any amount between RM90, 000 and RM100, 000 4 Prepare the following: (i) Bad debts accounts for…1. the accountant finds from the copy of the loan record and from the company's checking account that the Bank has calculated the interest on 31/12 in the amount of 4,000 euros and has withdrawn the installment of the loan in the amount of 8,000 euros. 2. An additional 20,000 euros from customers are bad debts, the company's policy for the closing year is to cover them with provisions by 100%, and it also amortizes bad customers amounting to 10,000 euros. write the journal entries
- A clothing wholesaler is experiencing cash flow problems for several years due to its accounts receivables. Some of the amounts due by debtors are irrecoverable and the company is contemplating creating a provision for doubtful debts. (a) How is a provision for doubtful debts created and maintained? Explain, with figures if necessary, in not more than 200 words. (b) Discuss, in not more than 200 words, the concept or convention on which a provision for doubtful debts is based. (c) Explain, in not more than 300 words the differences between a bad debt and a provision for doubtful debts. (d) The financial year end of the clothing wholesaler is 31 December. You have been provided the following information by the management of the company: YEAR Bad debts written off year to 31 December Accounts receivable at 31 December after bad debts written off Percentage allowance for doubtful debts 1 Use…Which one of the following statements concerning bad debt expenses is correct? Select one: a. When you write off an accounts receivable, you debit bad debt expense and credit accounts receivable. b. You record bad debt expense when individual accounts receivable becomes uncollectible. c. Under the percentage of receivables method, bad debt expense is the year-end receivables multiplied by the % of uncollectible accounts. d. When the allowance method is used, bad debt expense is recorded before the accounts are written off.The Tigers need to record a journal entry to estimate their bad debt expense for the period. The A/R aging shows a total of $750,000 in Accounts Receivable, which is broken down as follows in age: $500,000 is 0 30 days old; $200,000 is 31 60 days old; and $50,000 is over 60 days old. Under the aging of receivables approach for estimating bad debt expense, the Tigers expect the following uncollectible %'s: 1% of the A/R that is 0 - 30 days old; 14% of the A/R amounts 31 60 days old, and 23% of the A/R amount past due for more than 60 days. The Allowance for Uncollectible A/R account currently has a beginning debit balance of $1,000. What amount will be credited to the Allowance for Uncollectible A/R account for this journal entry. Fill in the blank with your calculated number. DO NOT include commas, $ signs, period, decimal points, etc., just enter the raw number. Webcourses will add commas to your answer automatically. For example, if you calculated the answer to be $24,123, you would…
- STUVWXYZ Department store located in a metropolitan area, has been experiencing difficulty in estimating its bad debts. The company had decided to prepare an aging schedule for outstanding accounts receivable and estimate bad debts by the due dates of its receivables. This analysis discloses the following information: Estimated Percentage Balance Age of receivable Uncollectible 193,000 under 30 days 0.8% 114,000 30-60 days 2.0% 73,000 61-120 days…Cowen’s, a large department store located in a metropolitan area, has been experiencing difficulty in estimating its bad debts. The company has decided to prepare an aging schedule for its outstanding accounts receivable and estimate bad debts by the due dates of its receivables. This analysis dis loses the following information: Balance Age of Receivable Estimated Percentage Uncollectible $191,000 Under 30 days 0.8% 118,000 30-60 days 2.0% 73,000 61-120 days 5.0% 41,000 121-240 days 20.0% 25,000 241-360 days 35.0% 19,000 Over 360 days 60.0% $467,000 CHART OF ACCOUNTS Cowen’s General Ledger ASSETS 111 Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings…The bank statement on 31 October 20X7 showed an overdraft of $800. On reconciling the bank statement, it was discovered that a cheque drawn by your company for $80 had not been presented for payment, and that a cheque for $130 from a customer had been dishonoured on 30 October 20X7, but that this had not yet been notified to you by the bank. What is the correct bank balance to be shown in the statement of financial position at 31 October 20X7? A $1,010 overdrawn B $880 overdrawn C $750 overdrawn D $720 overdrawn
- The bank statement on 31 October 20X7 showed an overdraft of $800. On reconciling the bank statement, it was discovered that a cheque drawn by your company for $80 had not been presented for payment, and that a cheque for $130 from a customer had been dishonoured on 30 October 20X7, but that this had not yet been notified to you by the bank. What is the correct bank balance to be shown in the statement of financial position at 31 October 20X7?On December 31 of the current year, the following accounts were discovered in the BT21 Company's ledger: Dr. Accounts Receivable is at P356,800; Cr. Bad Debt Allowance is for P8,760; Cr. Cash Sales is worth P913,800; and Cr. Credit Sales is worth P1,851,000. Five percent of the outstanding accounts receivable, according to analysis, won't be recovered. What amount of the allowance for bad debts will need to be adjusted on December 31?Twilight Company uses the aging of accounts receivable method to estimate Bad Debt Expense. The balance of each account receivable is aged on the basis of three categories as follows: (1) 1-30 days old, (2) 31-90 days old, and (3) more than 90 days old. Based on experience, management has estimated what portion of receivables of a specific age will not be paid as follows: (1) 1%, (2) 15%, and (3) 36%, respectively. At December 31, 2019, the unadjusted credit balance in the Allowance for Doubtful Accounts was $230. The total Accounts Receivable in each age category were: (1) 1-30 days old, $59,000, (2) 31-90 days old, $11,000, and (3) more than 90 days old, $4,000. Required: a. Calculate the estimate of uncollectible accounts at December 31, 2019. b. Prepare the appropriate adjusting entry dated December 31, 2019. Complete this question by entering your answers in the tabs below. Required A Required B Calculate the estimate of uncollectible accounts at December 31, 2019. Estimated…