Allowance Method of Accounting for Bad DebtsComparison of the Two Approaches Kandel Company had the following data
Question:
Allowance Method of Accounting for Bad Debts—Comparison of the Two Approaches Kandel Company had the following data available for 2010 (before making any adjustments):
Accounts receivable, 12/31/10 ............$320,100
Allowance for doubtful accounts ..............2,600
Net credit sales, 2010 ................834,000
Required
1. Identify and analyze the adjustment to recognize bad debts under the following assumptions:
(a) Bad debts expense is expected to be 2% of net credit sales for the year and
(b) Kandel expects it will not be able to collect 6% of the balance in accounts receivable at year-end.
2. Assume instead that the balance in the allowance account is a negative $2,600. How will this affect your answers to (1)?
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Step by Step Answer:
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1133161646
7th Edition
Authors: Gary A. Porter, Curtis L. Norton