Question
Noren Company uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable
Noren Company uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable debt for 2019.
030 Days Past Due
3190 Days Past Due
Over 90 Days Past Due
Accounts receivable amount
$120,000
$80,000
$65,500
Percentage uncollectible
7%
20%
40%
Total per category?
Total uncollectible?
To manage earnings more favorably, Noren Company considers changing the past-due categories as follows.
060 Days Past Due
61120 Days Past Due
Over 120 Days Past Due
Accounts receivable amount
$160,000
$50,500
$55,000
Percentage uncollectible
7%
20%
40%
Total per category
?
?
?
Total uncollectible?
Noren Company
Comparative Income Statements
Year Ended Dec. 31, 2019
Original Categories
Categories Change
Net Credit Sales
$1,240,000
$1,240,000
Cost of Goods Sold
60,000
60,000
Gross Margin
$1,180,000
$1,180,000
Expenses:
General and Administrative Expense
300,500
300,500
Bad Debt Expense
?
?
Total Expenses
?
?
Net Income (Loss)
?
?
Solution
A.
030 Days Past Due
3190 Days Past Due
Over 90 Days Past Due
Accounts receivable amount
$120,000
$80,000
$65,500
Percentage uncollectible
7%
20%
40%
Total per category
Total uncollectible
060 Days Past Due
61120 Days Past Due
Over 120 Days Past Due
Accounts receivable amount
$160,000
$50,500
$55,000
Percentage uncollectible
7%
20%
40%
Total per category
Total uncollectible
C.
Noren Company
Comparative Income Statements
Year Ended Dec. 31, 2019
Original Categories
Categories Change
Net Credit Sales
$1,240,000
$1,240,000
Cost of Goods Sold
60,000
60,000
Gross Margin
$1,180,000
$1,180,000
Expenses:
General and Administrative Expense
300,500
300,500
Bad Debt Expense
Total Expenses
Net Income (Loss)
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Auditing
Authors: David Ricchiute
8th Edition
0324226292, 978-0324226294
