(fill in the blanks) Bennett Company had the following data on December 31, 20X1

Question

(fill in the blanks) Bennett Company had the following data on December 31, 20X1, before any adjustments:

Allowance for Doubtful Accounts, December 31 Total credit sales Click here to use the sliders for (1) Bad debt as a percent of credit sales and (2) Accounts Receivable, December 31 (before adjustments) to answer the following questions 1. Answer parts a., b., c., and d. if the company (1) estimates Bad Debt Expense at 0.3% percent of credit sales, and (2) has Accounts Receivable, December 31 (before adjustments) of $425,000. $31,000 credit 6,400,000 a. What is the amount of Bad Debt Expense that Bennett Company will report on its 20x1 income statement? b. What is the net realizable value of Accounts Receivable that Bennett Company will report on its December 31, 20X1 balance sheet? c. If bad debt as a percent of credit sales increases, the Bad Debt Expense that Bennett will report on its 20X1 income statement will increase d. If Accounts Receivable, December 31 (before adjustment) increases, the Bad Debt Expense that Bennett will report on its 20X1 income statement will remain the same 2. Answer parts a., b., c., and d, if the company (1) estimates Bad Debt Expense at 0.696 percent of credit sales, and (2) has Accounts Receivable, December 31 (before adjustments) of $525,000. a. What is the amount of Bad Debt Expense that Bennett Company will report on its 20X1 income statement? b. What is the net realizable value of Accounts Receivable that Bennett Company will report on its December 31, 20X1 balance sheet? c. If bad debt as a percent of credit sales decreases the net realizable value of Accounts Receivable that Bennett Company will e to its 20xi nco e statement will increas d. If Accounts Receivable, December 31 (before adjustment) decreases, the Bad Debt Expense that Bennett Company will report on its 201 income statement will remain the same .

Explanation / Answer

1. a.Bad debts expense= 0.3%*$6400000=$19200

b. Net realisable value of debtors=$425000

Because adjustment for bad debts recognized will be

Bad debts a/c dr. 19200

To allowance for bad debts 19200

c. Increase

d. Remains same

2.a. Bad debts expense= 0.6%*$6400000=$38400

b. Net realisable value of net receivables= $517600

Because adjustment for bad debts would be

Bad debts a/c dr. 38400

To allowance for bad debts 31000

To accounts receivables. 7400

Thus, net value of receivables will be

525000-7400=$517600

c. Increase

d. Remains same

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