Information related to accounts receivable is given for two cases:
Case 1 Technology Solutions uses the credit sales method to estimate bad debt expense. Sales this year were $ 5,600,000, of which 70% were on credit. History has shown that 1.2% of credit sales will be uncollectible over time. he company reported a balance of $ 677,200 of accounts receivable at the end of the year before any adjustment. he allowance for doubtful accounts was $ 14,900, and the allowance for sales discounts was $ 6,000 before adjustment. Analysis shows that receivables of $ 24,500 must be written of, and approximately $ 3,900 of cash discounts will be taken when existing accounts receivable are collected.
Case 2 At the beginning of the year, Health Products Corp. has a balance of $ 2,450,000 in accounts receivable and $ 220,000 in the allowance for doubtful accounts. Sales for the year were $ 19,300,000, of which 70% were on credit. Cash payments on account were $ 12,905,000. Sales returns were $ 340,000. Accounts of $ 107,600 were written of, but $ 32,900 was subsequently recovered and collected. his $ 32,900 cash payment was in addition to the collections previously mentioned. At year- end, a review indicated that 8% of outstanding accounts receivable were uncollectible, but that there was no risk of further sales returns.

For each case above, show how net accounts receivable would be reported on the statement of inancial position, and calculate bad debt expense for the year.

  • CreatedFebruary 17, 2015
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