[MustPass1988]

Becker Question –

This question is one of the optional questions and it seems simple enough but I’m struggling to understand why ‘uncollectible accounts’ isn’t included in the formula.

Beginning AR 21,600

Ending AR

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[MustPass1988]

Wow, sorry that posted too soon.

Beginning AR- 21,600

Ending AR- 30,400

Sales on Account and Cash Sales- 438,000

Uncollectible Accounts- 1000

What is the cash collected from customer?

The answer is $429,200 which you get by adding the sales to the beginning AR compare to ending AR and “squeeze” the cash collection. I don't understand why the uncollectible accounts are not deducted from the beginning AR. This problem keeps tripped me up because I keep viewing the uncollectible accounts as write offs, so I'm crediting AR.

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[MustPass1988]

Wow, sorry that posted too soon.

Beginning AR- 21,600

Ending AR- 30,400

Sales on Account and Cash Sales- 438,000

Uncollectible Accounts- 1000

What is the cash collected from customer?

The answer is $429,200 which you get by adding the sales to the beginning AR compare to ending AR and “squeeze” the cash collection. I don't understand why the uncollectible accounts are not deducted from the beginning AR. This problem keeps tripped me up because I keep viewing the uncollectible accounts as write offs, so I'm crediting AR.

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[Guti]

Allowance for uncollectible account is a contra AR account (separate account). You debit Bad debt exp and credit allowance for uncollectible accounts. Since it is a separate account, it won’t go directly into the AR account unless the uncollectible account is written off. The question here is what happened in the AR account? And not what happened in the AR and its contra account (allowance etc)

FAR-84
AUD-
REG-
BEC-

[Guti]

Allowance for uncollectible account is a contra AR account (separate account). You debit Bad debt exp and credit allowance for uncollectible accounts. Since it is a separate account, it won’t go directly into the AR account unless the uncollectible account is written off. The question here is what happened in the AR account? And not what happened in the AR and its contra account (allowance etc)

FAR-84
AUD-
REG-
BEC-

[Anonymous]

MustPass, just think of how you are going to present the activities in JEs.

Under accrual basis, JE on AR, Beg.:

DR AR 21,600

CR Sales 21,600

Sales on account:

DR AR 438,000

CR Sales 438,000

Uncollectible accounts:

DR BDE 1,000 (Bad Debt Expense)

CR ADA 1,000 (Allowance for Doubtful Account/Bad Debt)

Now we see that AR is not affected when we journalize BDE using allowance method.

Since AR, Ending is given, we can calculate that cash collected using the cash basis method, whose JE would be:

DR Cash 429,200

Cr AR 429,200

T-Account for AR:

---

21,600 ………]

438,000 …….]

…………………] 429,200

---

30,400

==========

[Anonymous]

MustPass, just think of how you are going to present the activities in JEs.

Under accrual basis, JE on AR, Beg.:

DR AR 21,600

CR Sales 21,600

Sales on account:

DR AR 438,000

CR Sales 438,000

Uncollectible accounts:

DR BDE 1,000 (Bad Debt Expense)

CR ADA 1,000 (Allowance for Doubtful Account/Bad Debt)

Now we see that AR is not affected when we journalize BDE using allowance method.

Since AR, Ending is given, we can calculate that cash collected using the cash basis method, whose JE would be:

DR Cash 429,200

Cr AR 429,200

T-Account for AR:

---

21,600 ………]

438,000 …….]

…………………] 429,200

---

30,400

==========

[MustPass1988]

Okay that makes sense. I was overthinking it I guess. I always do the t-accounts to figure out these kind of problems which helps a lot. I just need to remember that an uncollectible account and write off are not the same thing.

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[MustPass1988]

Okay that makes sense. I was overthinking it I guess. I always do the t-accounts to figure out these kind of problems which helps a lot. I just need to remember that an uncollectible account and write off are not the same thing.

AUD: PASSED [81]; Expired, retaking August 23rd
BEC: PASSED [83]; Expired, retaking July 11th
REG: PASSED [83]
FAR: FAILED [64]; Retaking May 23rd

[Author]

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