Mahogany Company had the following information relating to its accounts receivable at December 31, 2011, and for

Question:

Mahogany Company had the following information relating to its accounts receivable at December 31, 2011, and for the year ended December 31, 2012:

Accounts receivable balance at 12/31/11 . . . . . . . . . . . . . . . . . . .. . . . . . . . . $ 750,000

Allowance for bad debts at 12/31/11 (credit balance) . . . . . . . . . . . . . . . . . . 45,000

Gross sales during 2012 (all credit). . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 3,500,000

Collections from customers during 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,075,000

Accounts written off as uncollectible during 2012 . . . . . . . . . . . . . . . . . . . . . 50,000

Estimated uncollectible receivables at 12/31/12 . . . . . . . . . . . . . . . . . . . . . . 90,000

Mahogany Company uses the percentage of receivables method to estimate bad debt expense.

1. At December 31, 2012, what is the balance of Mahogany Company’s Allowance for Bad Debts? What is the bad debt expense for 2012?

2. At December 31, 2012, what is the balance of Mahogany Company’s gross accounts receivable?

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...