Fit America Company (FAC) has provided the following information for the Year 2023: As of Jan. 1,
Question:
Fit America Company (FAC) has provided the following information for the Year 2023:
As of
Jan. 1, 2023, Dec. 31, 2023
Accounts Receivable $160,000 $180,000
Allowance for Doubtful Accounts (ADA) ($12,900) ($14,000)
Accounts Receivable, net of ADA $147,100 $166,000
Note: The Allowance for Doubtful Accounts balance on December 31, 2023, includes the bad debt expense recorded by the company for 2023. Additional data:
1) During the Year 2023, the company wrote off $13,100 of receivables as uncollectible.
2) Total sales during the Year 2023 totaled $900,000. Half of the sales were on credit (i.e., were first recorded as accounts receivable), and half were paid for in cash. For credit sales, customers are given 30 days to pay for the purchase.
a. Based on the above data, calculate the bad debt expense recorded by FAC for the Year 2023.
b. Also determine how much cash was collected on receivables by FAC during the year 2023.
c. For the forthcoming year 2024, FAC plans to use the percentage of sales method to determine its bad debt and allowance for doubtful accounts. FAC’s CFO estimates that the appropriate percentage to use for the Year 2024 is 4.1% of expected 2024 credit sales of $800,000. Write-offs of receivables during 2024 are forecasted to be $21,000. Calculate the forecasted balance in the Allowance for Doubtful Accounts as of December 31, 2024.
Fundamental Accounting Principles Volume 2
ISBN: 9781260881332
17th Canadian Edition
Authors: Kermit D. Larson, Heidi Dieckmann, John Harris