Bad Debt Expense: Percentage of Credit Sales Method The Glass House, a glass and china store,...
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Bad Debt Expense: Percentage of Credit Sales Method The Glass House, a glass and china store, sells nearly half its merchandise on credit. During the past 4 years, the following data were developed for credit sales and losses from uncollectible accounts: Year of Sales Credit Sales Losses from Uncollectible Accounts 2020 $200,000 12,700 2021 2022 202,000 13,231 214,000 13,375 230,000 $846,000 18,975 $58,281 2023 Total "Losses from uncollectible accounts are the actual losses related to sales of that year (rather than write-offs of that year). Required: 1. Calculate the loss rate for each year from 2020 through 2023. Round your answers to three decimal places. Year Loss Rate 2020 0.064 V 2021 0.066 V 2022 0.063 2023 0.083 v Check My Work 2 more Check My Work uses remaining Previous Next eBook Yes 3. Conceptual Connection: The weighted average for the 4 years (rounded to three decimals) is 0.069 If credit sales for 2024 are $400,000, what rate would you recommend to estimate bad debts? A rate closer to 0.083 would be more conservative. 4. If credit sales for 2024 are $400,000 and using the rate you recommended above, record bad debt expense for 2024. Round your answer to three decimal places. Bad Debt Expense Allowance for Doubthal Accounts Record adjusting entry for bad debt expense estimate *. Check My Wor 5. Conceptual Connection: Using the data from 2020 through 2023, estimate the change in income from operations in total for those 4 years assuming (a) the average gross margin is 25% and (b) 50% of the sales would have been lost if no credit was granted. Round your answers to the nearest dollar, if required. Increase Increase in gross margin in income from operations Check My Work 2 more Check My Work uses remaining Bad Debt Expense: Percentage of Credit Sales Method The Glass House, a glass and china store, sells nearly half its merchandise on credit. During the past 4 years, the following data were developed for credit sales and losses from uncollectible accounts: Year of Sales Credit Sales Losses from Uncollectible Accounts 2020 $200,000 12,700 2021 2022 202,000 13,231 214,000 13,375 230,000 $846,000 18,975 $58,281 2023 Total "Losses from uncollectible accounts are the actual losses related to sales of that year (rather than write-offs of that year). Required: 1. Calculate the loss rate for each year from 2020 through 2023. Round your answers to three decimal places. Year Loss Rate 2020 0.064 V 2021 0.066 V 2022 0.063 2023 0.083 v Check My Work 2 more Check My Work uses remaining Previous Next eBook Yes 3. Conceptual Connection: The weighted average for the 4 years (rounded to three decimals) is 0.069 If credit sales for 2024 are $400,000, what rate would you recommend to estimate bad debts? A rate closer to 0.083 would be more conservative. 4. If credit sales for 2024 are $400,000 and using the rate you recommended above, record bad debt expense for 2024. Round your answer to three decimal places. Bad Debt Expense Allowance for Doubthal Accounts Record adjusting entry for bad debt expense estimate *. Check My Wor 5. Conceptual Connection: Using the data from 2020 through 2023, estimate the change in income from operations in total for those 4 years assuming (a) the average gross margin is 25% and (b) 50% of the sales would have been lost if no credit was granted. Round your answers to the nearest dollar, if required. Increase Increase in gross margin in income from operations Check My Work 2 more Check My Work uses remaining
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