Question
During October, ABC has credit sales of $400,000. If the % of Sales ADA technique is used, assume the % is 2%. As a result
During October, ABC has credit sales of $400,000. If the % of Sales ADA technique is used, assume the % is 2%. As a result of cash collection efforts, the October 31 Aging Schedule for ABC is as follows:
Current $150,000 (1% is estimated to be uncollectible)
1-30 Days Past Due $25,000 (5% is estimated to be uncollectible)
31-60 Days Past Due $10,000 (10% is estimated to be uncollectible)
61-90 Days Past Due $10,000 (20% is estimated to be uncollectible)
Greater than 90 Days Past Due $10,000 (50% is estimated to be uncollectible)
Balance in Allowance for Doubtful Accounts on October 1: $15,000 debit
Prepare the entries (T Accounts) for the entry required on October 31 for ABC assuming 1) ABC uses the % of Sales Method and 2) ABC uses the Aging of A/R Method. What is the cash and income statement impact of these entries? What is the impact on cash and income of any write-off?
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