Question

Evaluate the following scenarios, assuming both companies use the accounts receivable method of estimating bad debts expense:
a. At year end, Tate Company has accounts receivable of $89,000. The allowance for uncollectible accounts has a balance prior to adjustment of $(750). An aging schedule prepared on December 31 indicates that $2,100 of Tate’s accounts receivable is uncollectible. Net credit sales were $325,000 for the year.
b. At year end, Bradley Company has accounts receivable of $75,250. The allowance for uncollectible accounts has a balance prior to adjustment of $625. (The firm wrote off more than it had estimated.) An aging schedule prepared on December 31 indicates that $3,200 of Bradley’s accounts receivable is uncollectible. Net credit sales were $452,000 for the year.

Requirements
For each situation, compute the following:
1. The bad debts expense for the year
2. The balance in the allowance for uncollectible accounts at year end
3. The net realizable value of accounts receivable at year end
4. Based solely on the data provided, how many days does it take each company to collect its receivables, and which company is doing a better job of collecting its receivables? Explain your answer.



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  • CreatedSeptember 01, 2014
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