Hayford & Woodward, Inc. began business in January 2014. During 2014, it had credit sales of $ 29,000,000. As of December 31, 2014, it had the following balances in accounts receivable: align=center> Hayford & Woodwards auditors explained that the company will need to provide an estimate of its bad debts for the year. Hay ford & Woodward is considering the
Hayford & Woodward€™s auditors explained that the company will need to provide an estimate of its bad debts for the year. Hay ford & Woodward is considering the following possibilities:
1. Calculating the allowance for uncollectible accounts as a percentage of ending accounts receivable using 3, 4, 5, or 6% in the computations.
2. Calculating bad debt expense as a percentage of credit sales using 0.5, 1.0, 1.5, or 2.0% in the computations.
3. Calculating the allowance for uncollectible accounts with the aged accounts receivables method using the following percentages:
During 2015, Hayford & Woodward€™s sales of $ 30,500,000 were all on credit. Assume the 2014 allowances are unused in 2015. As of December 31, 2015, it had the following balances in accounts receivable:
1. Which method and percentage do you think Hayford & Woodward should choose and why?
2. D o the various approaches provide significantly different account balances on the financial statements in either 2014 or 2015?
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Accounts Receivable
Accounts 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...
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Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella