Asked by Chyna Forrester on Jun 14, 2024
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The Lily Company uses the percent of receivables method of accounting for uncollectible accounts receivable,and a perpetual inventory system.As of January 1,its net accounts receivable totaled $192,000 (Accounts Receivable $200,000 less an $8,000 Allowance for Doubtful Accounts).During the current year,the following transactions occurred.
Percent of Receivables Method
An accounting method used to estimate the amount of accounts receivable that will not be collected by calculating a percentage of receivables deemed uncollectible.
Uncollectible Accounts Receivable
Accounts from customers that are considered unrecoverable, leading to a write-off as a bad debt expense.
Allowance
A reduction from the gross amount of an asset or liability, created to account for potential future adjustments such as doubtful debts or returns.
- Acquire knowledge to differentiate various techniques for handling accounts receivable that cannot be collected.
- Clarify and figure out the expense incurred from bad debts utilizing the allowance method.
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Learning Objectives
- Acquire knowledge to differentiate various techniques for handling accounts receivable that cannot be collected.
- Clarify and figure out the expense incurred from bad debts utilizing the allowance method.
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