During its first year of operations, which ended on December 31, 2011, Fort Nelson Resources Ltd. determined
Question:
During its first year of operations, which ended on December 31, 2011, Fort Nelson Resources Ltd. determined that customers owing the company $12,000 would not be able to pay and wrote off these accounts. By the end of the year, the company had $1.7 million of accounts receivable and estimated that 10% of these were doubtful of collection. In 2012, the company wrote off accounts receivable amounting to $14,000. By December 31, 2012, the company had accounts receivable of $2.1 million and estimated doubtful accounts at 10% of outstanding accounts receivable.
Instructions
(a) Prepare the journal entries that Fort Nelson Resources would record in 2011.
(b) Prepare the journal entries that Fort Nelson Resources would record in 2012.
(c) Assess whether the company's policy of estimating doubtful accounts at 10% of outstanding receivables is appropriate.
Accounts ReceivableAccounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Step by Step Answer:
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118024492
5th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine