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Topic
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These questions look the same to me. However, one includes the prior credit balance the other one does not. What am I missing?
Question 1:
At January 1, 20X4, Jamin Co. had a credit balance of $260,000 in its allowance for uncollectible accounts. Based on past experience, 2% of Jamin’s credit sales have been uncollectible. During 20X4, Jamin wrote off $325,000 of uncollectible accounts. Credit sales for 20X4 were $9,000,000. In its December 31, 20X4, balance sheet, what amount should Jamin report as allowance for uncollectible accounts?
Answer:
$115,000 is Correct: The credit balance of $260,000 in the allowance would be increased by bad debts expense equal to 2% of credit sales of $9,000,000, or $180,000, and decreased by accounts written off of $325,000. As a result, the ending balance will be $115,000.
Question 2:
On March 31, 20X3, Vale Co. had an unadjusted credit balance of $1,000 in its allowance for uncollectible accounts. An analysis of Vale’s trade accounts receivable at that date revealed the following:
Age Amount Estimated uncollectible
0 – 30 days $60,000 5%
31-60 days $4,000 10%
Over 60 days $2,000 $1,400
What amount should Vale report as allowance for uncollectible accounts in its March 31, 20X3, balance sheet?
Answer:
$4,800
Under the aged analysis approach, the ending balance in the allowance for doubtful accounts is determined by analyzing accounts receivable and identifying the percentage of uncollectible accounts in each category. For Vale:
* 5% of the $60,000 of accounts 0-30 days past due will be uncollectible, or $3,000
* 10% of the $4,000 of accounts 31-60 days past due will be uncollectible, or $400
* $1,400 of the $2,000 of accounts over 60 days past due will also be uncollectible
FAR- 53, next time 5/5/16
B: 7/30/16
A:TBD
R:TBD
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