Dundee Company started business on January 1 of the current year. The company made total sales of

Question:

Dundee Company started business on January 1 of the current year. The company made total sales of $900,000 during the year, of which $ 150,000 were cash sales. By the end of the year, Dundee had received payments of $675,000 from its customers on account. It also wrote off as uncollectible $10,000 of its receivables when it learned that the customer who owed this amount had filed for bankruptcy. That was Dundee Company's only entry related to bad debts for the period.
Dundee's management decides to adopt the allowance method of accounting for bad debts. Since Dundee is a new company and does not have past experience to base its own estimates on, it decides to use 3% of credit sales as an estimate for its bad debt expense, which is the average percentage for its industry.
Required:
a. What amount of bad debts expense would Dundee Company report on its statement of earnings for the year?
b. What allowance for doubtful accounts balance would be reported on the at the end of the year?
c. What balance would be reported on the at the end of the year?
d. Evaluate the reasonableness of the balance in the allowance for doubtful accounts at the end of the year. Accounts Receivable
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... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...