Question
Global Storm Computers has credit sales of $600,000 and a debit balance of $1,600 in the allowance for expected credit losses at year end. As
Global Storm Computers has credit sales of $600,000 and a debit balance of $1,600 in the allowance for expected credit losses at year end. As of December 31, $105,000 of accounts receivable remain uncollected. The credit manager of Global Storm prepared an aging schedule of accounts receivable and estimates that $5,600 will result in credit losses.
On April 15 of the following year, Global Storm writes off the $1,500 balance owed by Raj Sharma.
Instructions
a) Prepare the adjusting entry to record the estimated credit losses at December 31.
b) Show the statement of financial position presentation of accounts receivable on December 31.
c) On April 15, before the writeoff, assume the balance of Accounts Receivable account is $123,000 and the balance of Allowance for Expected Credit Losses is a credit of $3,000. Make the appropriate entry to record the writeoff of the Sharma account receivable. What it is the net realizable value of the accounts receivable before and after the writeoff?
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