The accounts of Long Company provided the following 20X5 information at 31 December 20X5 (end of the annual period):
Accounts receivable balance, 1 January 20X5 ........... $ 51,000
Allowance for doubtful accounts balance, 1 January 20X5...... 3,000
Total sales revenue during 20X5 (on credit) ........... 160,000
Uncollectible account to be written off during 20X5 (ex- customer Slo). 1,000
Cash collected on accounts receivable during 20X5 ........ 170,000
Estimates for bad debt losses: a. Based on credit sales, 1%. b. Based on ending balance of accounts receivable, 8%. c. Based on aging schedule ( excludes Slo’s account):

1. Give the entry to write of customer Slo’s long- overdue account.
2. Give all entries related to accounts receivable and the allowance account for the following three cases:
Case A— Bad debt expense is based on credit sales
Case B— Bad debt expense is based on the ending balance of accounts receivable
Case C— Bad debt expense is based on aging
3. Show how the results of applying each case above should be reported in 20X5 earnings and on the 20X5 statement of financial position.
4. Briefly explain and evaluate each of the three methods used in Cases A, B, and C.
5. On 1 August 20X6, customer Slo paid his long- overdue account in full. Give the requiredentries.

  • CreatedFebruary 17, 2015
  • Files Included
Post your question