See Appendix B for the aged receivables trial balance for BCS. Review it and explain what the information in each column represents.
a. Use this information to calculate a bad debt provision for BCS at December ]31, 2010? Last year BCS used the following percentages to calculate the bad debt provision: current accounts, − .05%; > 30 day accounts, − 2%; >60 day accounts, − 10%; > 90 day accounts, 40%. First calculate the allowance using the percentages applicable in the previous year. Then, if you determine that actual write-offs last year were $20,000 more than the provision and that the economic conditions for BCS customers has worsened in the current year, explain how you could adjust the allowance.
b. Why is it necessary for BCS to estimate bad debt expense at year-end? What accounting principle does BCS violate if it does not estimate bad debt?

  • CreatedJanuary 22, 2015
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