The following items were taken from the annual report of Andrew Corp. Please rea
ID: 2384908 • Letter: T
Question
The following items were taken from the annual report of Andrew Corp. Please read the question carefully.2001 Credit Sales $7,000
2001 Bad Debt write-offs 150
12/31/01 Accounts Receivable 7,000
12/31/01 Allowance for Doubtful accounts 2,000
2001 Cash Collections from customers 2,000
Andrew uses the percentage of sales method to estimate bad debts. Andrew’s estimated bad debt percentage for 2001 was 5%.
a. What is the net realizable value of Andrews’s accounts receivable at 12/31/01? 2 points
b. What was the amount of bad debt expense for 2001? 2 points
c. What was the 12/31/00 Accounts Receivable balance? 2 points
d. What was the 12/31/00 Allowance for Doubtful accounts balance? 2 points
Explanation / Answer
a. What is the net realizable value of Andrews’s accounts receivable at 12/31/01? 2 points net realizable value = accounts receivable – allowance for doubtful accounts = 7,000 – 2,000 = 5,000 Answer: $5,000 b. What was the amount of bad debt expense for 2001? 2 points Bad Debt expense = Credit sales*estimated bad debt percentage = 7,000*0.05 = 350 Answer: $350 c. What was the 12/31/00 Accounts Receivable balance? 2 points Accounted receivable on 12/31/2000 = Accounts receivable on 12/31/2001 – sales + write-offs + collections = 7,000 – 7,000 + 150 + 2,000 = 2,150 Answer: $2,150 d. What was the 12/31/00 Allowance for Doubtful accounts balance? 2 points Allowance for doubtful accounts on 12/31/2000 = allowance for doubtful accounts on 12/31/2001 + write offs – bad debt expense = 2000 + 150 – 350 = 1800. Answer: $1,800
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