Asked by Julie David on Apr 26, 2024
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Gross Accounts Receivable is $21,000. Allowance for Doubtful Accounts has a credit balance of $600. Net credit sales for the year are $132,000. In the past, 3% of credit sales had proved uncollectible, and an aging of the receivables indicates $1,800 is doubtful. Under the balance sheet approach, Bad Debts Expense for the year is:
A) $2,400.
B) $4,560.
C) $3,960.
D) $1,200.
Balance Sheet Approach
A method used to calculate the amount required in the Allowance for Doubtful Accounts to cover expected uncollectibles. This method is based on the Accounts Receivable amount and the aging process. The adjustment to the Allowance for Doubtful Accounts will bring the new balance of that account to the new required level.
Bad Debts Expense
The portion of receivables that a company does not expect to collect and writes off as a loss.
Gross Accounts Receivable
The total amount owed to a company by its customers for goods or services sold on credit before any deductions for returns or allowances.
- Comprehend techniques for estimating uncollectible accounts expense through analysis of sales and receivables figures.
- Analyze accounts receivable using the aging of accounts receivable method.
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Learning Objectives
- Comprehend techniques for estimating uncollectible accounts expense through analysis of sales and receivables figures.
- Analyze accounts receivable using the aging of accounts receivable method.
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