In an attempt to include all relevant information for decision-making purposes, Merimore Company estimates bad debts using
Question:
On December 31, 2017, the controller prepared the following aging of accounts receivable:
The allowance for doubtful accounts balance on January 1, 2017, was a credit of $70,000.
REQUIRED:
a. Prepare the adjusting journal entry necessary on December 31, 2017, so that the statements will be in accordance with the companys external reporting policies. Remember that the company prepares monthly adjusting journal entries.
b. Compute the balance in allowance for doubtful accounts after the entry in (a) has been recorded and posted.
c. Compute the balance in accounts receivable as of January 1, 2017.
d. Prepare the December 31 adjusting entry for bad debts using the aging method.
e. Why would a company want to estimate bad debts using two different methods? Which of the two methods is more costly and time-consuming to implement? Which provides more useful information?
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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