Arizona Company reported accounts receivable of $21,200,000 at the end of its 20
ID: 2381605 • Letter: A
Question
Arizona Company reported accounts receivable of $21,200,000 at the end of its 2009 fiscal year. This amount was net of an allowance for doubtful accounts of $1,456,000. During 2010, Georgia sold $72,300,400 of merchandise on credit. It collected $48,520,555 from customers. Accounts valued at $2,125,000 were written off as uncollectible during 2010. Arizona's management estimates that 8% of the year-end accounts receivable balance will be uncollectible.What amount will Arizona report for accounts receivable? Show your computations to earn credit.
What is the balance for the allowance for doubtful accounts at the end of 2010? (round to whole numbers). Show computations to earn credit.
What is the doubtful accounts expense for 2010? Show computations to earn credit.
Explanation / Answer
What amount will Arizona report for accounts receivable? Show your computations to earn credit.
Beginning Accounts Receivable (net)
21,200,000
Plus Allowance for doubtful accounts
1,456,000
Equals Beginning Accounts Receivable
22,656,000
Plus sales on credit
72,300,400
Less collections
48,520,555
Less write-offs
2,125,000
Equals ending Accounts Receivable
44,310,845
Answer: $44,310,845
What is the balance for the allowance for doubtful accounts at the end of 2010? (round to whole numbers). Show computations to earn credit.
They will want the allowance account to equal 8% of the year-end AR,so the allowance account will equal 44,310,845*0.08 = $3,544,868
Answer: $3,544,868.
What is the doubtful accounts expense for 2010? Show computations to earn credit.
The Allowance account began with a credit balance of 1,456,000; 2,125,000 was written off during the year. 1,456,000 – 2,125,000 = -669,000. So the Allowance account will have a debit balance of 669,000 before the adjustment.
Since they want the balance to equal a credit balance of 3,544,868, the adjustment will be a credit of 669,000 + 3,544,868 = 4,213,868
The journal entry would be debit to doubtful accounts expense of 4,213,868 and credit to the allowance account of 4,213,868. So the doubtful accounts expense is 4,213,868.
Answer: $4,213,868.
Beginning Accounts Receivable (net)
21,200,000
Plus Allowance for doubtful accounts
1,456,000
Equals Beginning Accounts Receivable
22,656,000
Plus sales on credit
72,300,400
Less collections
48,520,555
Less write-offs
2,125,000
Equals ending Accounts Receivable
44,310,845
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