For several years, Xtreme Co.s sales have been on a cash only basis. On January 1, 2011,
Question:
Laurie Jones, president of Xtreme Co., is concerned that the method used to account for and write off uncollectible receivables is unsatisfactory. She has asked for your advice in the analysis of past operations in this area and for recommendations for change.
1. Determine the amount of
(a) The addition to Allowance for Doubtful Accounts
(b) The accounts written off for each of the four years.
2. a. Advise Laurie Jones as to whether the estimate of ½ of 1% of credit sales appears reasonable.
b. Assume that after discussing (a) with Laurie Jones, she asked you what action might be taken to determine what the balance of Allowance for Doubtful Accounts should be at December 31, 2014, and what possible changes, if any, you might recommend in accounting for uncollectible receivables. How would yourespond?
Step by Step Answer:
Corporate Financial Accounting
ISBN: 978-1133952411
12th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac