Question
Resolution Journals Inc. uses the aging of receivables method to estimate the amount that should be reported in the allowance for doubtful accounts at the
Resolution Journals Inc. uses the aging of receivables method to estimate the amount that should be reported in the allowance for doubtful accounts at the end of the period. At the end of the period outstanding accounts receivable total $1,560,000 and the unadjusted balance in the allowance for doubtful accounts is $18,000. Of the $1,560,000 in accounts receivable, $120,000 are 1-30 days past due; $80,000 are 31-90 days past due; and $30,000 are more than 90 days past due. The remaining receivables are current (not past due). Based on historical experience, current economic conditions, and the company's credit policy, the company expects the following percentages to be uncollectible from each category of receivables:
Current: 1%
1-30 Day past due: 3%
31-90 Days past due: 4%
More than 90 Days past due: 10%
Calculate the Bad Debt Expense reported for the year.
b) On July 1st, Resolution Journals Inc. exchanges an account receivable from a customer with a $100,000 note receivable due in 4 months with a 12% annual interest rate. The customer repays the loan and the accrued interest on October 31st. Assume that interest is not compounding from period to period, but is recorded at the end of each quarter. On October 31st, Resolution Journals Inc. credits the following accounts:
Note: Keep in mind that Resolution Journals Inc. records both the payment of the note receivable and the related interest. In addition, Resolution Journals Inc. recorded interest at the end of the quarter on September 30th.
Question b options:
1)Interest Receivable
2)Interest Revenue
3)Cash
4)Accounts Receivables
5)Note Receivable
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