Question 6 options: At January 1, 2014, Famous Thirty Three Company reported acc

ID: 2427255 • Letter: Q

Question

Question 6 options: At January 1, 2014, Famous Thirty Three Company reported accounts receivable of $100,000 and the allowance for doubtful accounts had a $15,000 credit balance. Famous Thirty Three Company records bad debt expense using the net credit sales method and estimates that 5% of its credit sales each year will prove to be uncollectible.

Famous Thirty Three Company reported the following information for 2014 and 2015:

2014 2015

Sales revenue ? $428,000

Cash collections from customers $370,000 $410,000

Accounts receivable at December 31 ? ?

Allowance for doubtful accounts at December 31 $29,900 $59,600

Write-offs $9,400 ?

Recoveries $4,700 ?

At December 31, 2015, Famous Thirty Three Company's net realizable value of accounts receivable totaled $67,200.

Calculate Famous Thirty Three Company's accounts receivable balance at December 31, 2014.

Explanation / Answer

Calculation of Company's accounts receivable balance at December 31, 2014:

Allowance for doubtful accounts at December 31, 2014

$ 29,900

Less: Allowance for doubtful accounts at January 1, 2014

(15,000)

Add: Write-offs for 2014

$ 9,400

Less: Recoveries for 2014

$ (4,700)

Bad Debts Expense for the year 2014

$ 19,600

Bad debts as % of Net Credit Sales =

Net credit sales for 2014 = 19600 / 5% =

$ 392,000

Accounts receivable at January 1, 2014

100,000

Add: Net credit sales for 2014

$ 392,000

Less: Cash collections from customers

$ (370,000)

Less: Write-offs

$ (9,400)

Add: Recoveries

$ 4,700

Accounts receivable at December 31, 2014

$ 117,300