During 2015, Lacee Enterprises had gross sales of $247,000. At the end of 2015, Lacee had accounts

Question:

During 2015, Lacee Enterprises had gross sales of $247,000. At the end of 2015, Lacee had accounts receivable of $83,000 and a credit balance of $5,600 in Allowance for Bad Debts. Lacee has used the percentage-of gross- sales method to estimate the bad debt expense. For the past several years, the amount estimated to be uncollectible has been 3%.

Instructions:

1. Using the percentage-of-gross-sales method, estimate the bad debt expense and make any necessary adjusting entries.

2. Assuming that 6% of receivables are estimated to be uncollectible and that Lacee decides to use the percentage-of-receivables method to estimate the bad debt expense, estimate the bad debt expense and make any adjusting entries.

3. Which of the two methods more accurately reflects the net realizable value of receivables?

Explain.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-1133957911

19th edition

Authors: Earl K. Stice, James D. Stice

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