At the beginning of the current period, Rose Corp. had balances in Accounts Rece
ID: 2333909 • Letter: A
Question
At the beginning of the current period, Rose Corp. had balances in Accounts Receivable of $200,000 and in Allowance for Doubtful Accounts of $9,000. During the period, it had credit sales of $800,000 and collections of $763,000. It wrote off as uncollectible accounts receivable of $7,300. Uncollectible accounts are estimated to total $25,000 at the end of the period. (Omit recording cost of goods sold.)
Instructions
Record sales and collections during the period.
Record the write-off of uncollectible accounts during the period.
Record bad debt expense for the period.
Determine the ending balances in Accounts Receivable and Allowance for Doubtful Accounts.
Assets =
Liab. +
OE
Cash
Gross A/R
Allowance
D/A
n/a
RE
notes
Beg Balance
n/a
200,000
-9,000
n/a
n/a
Sales
Collections
Write off
Bad debt expense
Ending balance
n/a
n/a
n/a
Compare the net realizable value of the receivables at the beginning to the end of the period.
In comparing the beginning to the end of the period, does management expect that they will be able to collect a greater or lesser proportion of outstanding receivables? Why?
Assets =
Liab. +
OE
Cash
Gross A/R
Allowance
D/A
n/a
RE
notes
Beg Balance
n/a
200,000
-9,000
n/a
n/a
Sales
Collections
Write off
Bad debt expense
Ending balance
n/a
n/a
n/a
Explanation / Answer
Cash Gross AR Allowance Liabilities+ Ret Earnings Notes Beg Balance 200000 9000 Sales 800000 800,000 Increases the revenue with sales Collections 763000 -763000 Cash collected decreases the AR Write off -7300 -7300 Reduces both AR and allowance bad debt expenses 23300 -23,300 Bad debts expenses reduces the balance the net income Ending balance 763000 229700 25000 776,700 Net realizable value of Accounts receivable: Accounts receivable (Gross) 229700 Less: Allowance for uncollectble accounts 25000 Accounts receivable (Net) 204700 % of Uncollectible for Gross AR (Beginning ): 9000/200000*100 = 4.50% % of Uncollectible for Gross AR (Ending ): 25000/229700*100 = 10.88% Thus, Management expects the lesser collections of outstanding receivables.
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