INFO: The proportion of credit sales which typically default is 0.25%. The firm has $50,000 of accounts receivable that are current and typically creditors default on 0.5% of those accounts receivable. $8,000 of the accounts receivable are 1-30 days late and creditors typically default on 3% of those receivables. The remaining $10,400 of accounts receivable are 31 or more days late and default rates are typically 15% on those accounts receivable.

QUESTION: Show the t-accounts for allowance for doubtful accounts for PayLater using the percentage of credit sale and the aging methods. Which method has the highest expenses and lower earnings? Also, present the balance sheet entry for accounts receivable at the end of 2020

Dec 31, 2019 Assets 50,000 Cash Accounts Receivable, less allowance for doubtful accounts of $2,000 Inventories Property, plant and equipment 58,000 90,000 200.000 Liabilities Accounts payable Long Term Debt 20.000 100.000 Shareholders Equity Common Stock Capital Stock Retained Earnings 3,000 57.000 218,000 Pavlater sold $900,000 of appliances during 2020. 90% of PayLater's sales were credit sales. During 2006, $1,600 of uncollectible accounts were written off. Here is a t-account for 2020 for gross accounts receivable for the firm. Gross accounts receivable initial 60,000 sales 900,000 890,000 1,600 payments received write offs of specific accounts receivable final 68,400 The gross accounts receivable t-account can also be written using credit sales in place of sales and payments of accounts receivable. Gross accounts receivable initial credit sales 60,000 810,000 800.000 1,600 payments received write offs of specific accounts receivable final 68,400