Following are the December 31, 2008, balances of Accounts Receivable and Allowance for Uncollectible Accounts for Easton
Question:
Accounts Receivable........................................... $6,400,000
Allowance for Uncollectible Accounts
(credit balance).................................................... 225,000
During 2009, EHC wrote off the following accounts:
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Required:
(a) Prepare the journal entries that were made to record the write-offs of the Cantole and Bono accounts.
(b) At year-end 2009, the company€™s accountant estimates that EHC should record an estimate of $327,000 for uncollectible accounts receivable. Prepare the appropriate adjusting journal entry to record uncollectible accounts expense at year-end.
(c) Suppose that the accountant in part (b) was too conservative in his estimate. Instead of uncollectible accounts receivable of $327,000, the company actually has uncollectible accounts of $218,000. How will the accountant€™s overstatement of year-end estimated uncollectible accounts receivables affect EHC€™s income statement and balance sheet for the year in question? How may this overstatement affect the decisions of third parties, such as bankers and investors, who rely on those ï¬nancial statements?
(d) Will the assumed overstatement referred to in part (c) affect EHC€™s ï¬nancial statements for the following year? If so, explain how. If not, explain why not.
(e) Is it ever permissible to intentionally overstate expenses in a company€™s ï¬nancial statements? Defend your answer and refer to related accounting concepts or principles from Chapter 2.
(f) Assume Myka Bono paid EHC $730 on August 14, 2010. How would this receipt be journalized by EHC?
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Step by Step Answer:
a Allowance for Uncollectible Accounts 2425 Accounts ReceivableCantole 2425 Allowance for Uncollecti...View the full answer
