The unadjusted net accounts receivable on the books of Elantra Limited as of 31 December 20X4 are as follows:
Accounts receivable.............. $ 100,000
Less: Allowance for doubtful accounts........ 10,000
...................... $ 90,000
Two alternatives are being considered for estimating the allowance at the end of 20X4: Alternative 1: Percentage of credit sales; Sales revenue was $ 3,000,000, of which 40% was on credit and 1% might be uncollectible
Alternative 2: Aging; 40% of the accounts are current and 5% might not be collected, and the remainder is past due and 30% might not be collected.

For each alternative, calculate the bad debt expense, the balance in the allowance for doubtful accounts, and the net accounts receivable on the SFP at the end of 20X4.

  • CreatedFebruary 17, 2015
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