Drumpf suppy has the following accounts receivable aging schedule as at december

Question

Drumpf suppy has the following accounts receivable aging schedule as at december 31,2015.

The balance in drumpf's allowance for doubtful accounts at the beginning of the year is $6,000(credit). During the year, accounts in the total amount of $4,500 were writeen off.

1.use formulas to calculate the allownace required for each line and the total allowance requied.

2.based on aging of receivables, the bad debit expense is___ (build the bad debt expense equation)

3. prepare the journal entry for bad debt expense

4.determine the bad debt expense using the percentafe of credit sales method at 1.5%. Credit sales for the year are $493,000. And prepare the journal entry for bad expense

5. Which method will result in the higher net income for the company?

Which method would a for-profit company probably prefer in these circumstance?

Please explain.

Accounts receivable Age Amount proportion expected to dedaulf allowance required current $150,000 0.5% 1-30 days past due $65,000 1.0% 31-45 days past due $16,500 13.0% 46-90 days past due $4,500 20.0% 91-135 days past due $3,000 25.0% over 135 days past due $1,500 60.0% In the aging of receivables schedule below, use formulas to ealculate the allowance required for each line and the total allowance required ged Accounts Receivable as at December 31, 2015 Accounts Receivable Age Amount 150,000 65,000 16.500 4,500 3.000 Percentage Expected to Default Allowance Required urrent 30 Days Past Due 1-45 Days Past Due 46-90 Days Past Due 0.5 1.0% 13.0% 20.0% 25.0% 135 Days Past Due The balance in Drumpf's allowance for doubtful accounts at the beginning of the year is $6,000 (credit). During the year, accounts in the total amount of $4,500 were written off. Part One Yow can use the spaces to the right to bwild the bad debt expense equation or you can build it all inte the answer cel. 1. Based on aging of receivables, the bad debt expense is: Easure you use a formula in the answer cell) 2. Prepare the journal entry for bad debt expense Part Two l. Determine the bad debt expense using the percentage of credit sales method at 1.5%. Credit sales for the vear are S493,00. Based on the percentage of credit sales method, the bad debt expense is: 2. Prepare the journal entry for bad debt expense. Part Three 1. Which method will result in the higher net income for the company? Which method would a for-profit company probably prefer in these circumstances? Use the grey space below to type your explanation.

Explanation / Answer

Accounst receivable Aging Amount % Expected of default Allowance required Current 150000 0.50% 750 1-30 days 65000 1% 650 31-45 days 16500 13% 2145 46-90 days 4500 20% 900 91-135 days 3000 25% 750 Over 135 days 1500 60% 900 Allowance Ending balance 6095 Part-1 Allowance for Doubtful Debts 6000 Less: Bad debts written off 4500 Balance left 1500 Balance Ending to be maintained 6095 Bad debts expense based on Ageing of receivables 4595 Journal entry: Bad debts expense Dr. 4595       Allowance for doubtful debts 4595 Part-2 Bad debts expense: Net credt sales   * Percentage of bad debts expense Bad debts expense: $ 493,000         * 1%       = $4,930 Bad debts expense based on Percent of sales method $4,930 Journal entry: Bad debts expense Dr. 4930       Allowance for doubtful debts 4930 Part-3 Allowance based on Aging of Accounts receivable methos results in higher income. Method based on aging of accounts receivable is probably prefered over toher method due to the reason that it is based on more realistic assumption that the accounts receivable whose aging is higher is having more risk of realisable. Hence, need more provision.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.