Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Carmichael Company is considering two alternative approaches to estimate uncollectible accounts expense for the current year: the Aging Schedule Method and the Percentage-of-Credit- Sales

Carmichael Company is considering two alternative approaches to estimate uncollectible accounts expense for

Carmichael Company is considering two alternative approaches to estimate uncollectible accounts expense for the current year: the Aging Schedule Method and the Percentage-of-Credit- Sales Approach. The Allowance for Doubtful Accounts before adjustments at December 31 showed a credit balance of $2,400. For the Aging Schedule Method the following year-end aging of the accounts receivable was prepared: Not yet due 1-30 days past due 31-60 days past due 61-90 days past due Over 90 days past due Total Amount $120,000 50,000 34,000 10,000 4,000 $218,000 Percentage Uncollectible 2% 4% 12% 24% 50% The company estimated the percentages uncollectible listed above based on past experience. For the Percentage-of-Credit-Sales the company estimates that uncollectible accounts will average 2% of net sales. Net Sales for the current year are $218,000. Instructions a. Aging Schedule Method: Compute the estimated amount of uncollectible accounts based on the above aging schedule and prepare the December 31 adjusting entry needed to bring the Allowance for Doubtful Accounts to the proper amount. Also, show the year- end balance sheet presentation of Accounts Receivable and Allowance for Doubtful Accounts. b. Percentage-of-Credit-Sales Approach: Compute the estimated amount of uncollectible accounts using management's estimate that uncollectible accounts will average 2% of net sales and prepare the December 31 adjusting entry.

Step by Step Solution

3.41 Rating (160 Votes )

There are 3 Steps involved in it

Step: 1

a Aging Schedule Method To compute the estimated amount of uncollectible accounts based on the aging ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Robert Libby, Patricia Libby, Daniel Short

8th edition

78025559, 978-0078025556

More Books

Students also viewed these Accounting questions

Question

How is the meaning of financial risk best described

Answered: 1 week ago

Question

Describe the general approach for layout design.

Answered: 1 week ago