What are the essential features of the allowance method of accounting for bad debts? Lauren Anderson cannot understand why the cash realizable value does not decrease when an uncollectible account is written off under the allowance method. Clarify this point for Lauren. E8-5 Hachey Company has accounts receivable of $95,100 at March 31, 2007. An analysis of the accounts shows these amounts. Balance, March 31 Month of Sale 2007 2006 March $65,000 $75,000 February 12,600 8,000 December and January 10,100 2,400 November and October 7,400 1,100 $95,100 $86,500 Credit terms are 2/10, n/30. At March 31, 2007, there is a $2,200 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company’s estimates of bad debts are as shown on page 402. Estimated Percentage Age of Accounts Uncollectible Current 2% 1–30 days past due 7 31–90 days past due 30 Over 90 days 50 Instructions (a) Determine the total estimated uncollectibles.(b) Prepare the adjusting entry at March 31, 2007, to record bad debts expense. (c) Discuss the implications of the changes in the aging schedule from 2006 to 2007. CLICK HERE TO GET THE ANSWER !!!! What are the essential features of the allowance method of accounting for bad debts? Lauren Anderson cannot understand why the cash realizable value does not decrease when an uncollectible account is written off under the allowance method. Clarify this point for Lauren. E8-5 Hachey Company has accounts receivable of $95,100 at March 31, 2007. An analysis of the accounts shows these amounts. Balance, March 31 Month of Sale 2007 2006 March $65,000 $75,000 February 12,600 8,000 December and January 10,100 2,400 November and October 7,400 1,100 $95,100 $86,500 Credit terms are 2/10, n/30. At March 31, 2007, there is a $2,200 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company’s estimates of bad debts are as shown on page 402. Estimated Percentage Age of Accounts Uncollectible Current 2% 1–30 days past due 7 31–90 days past due 30 Over 90 days 50 Instructions (a) Determine the total estimated uncollectibles. (b) Prepare the adjusting entry at March 31, 2007, to record bad debts expense. (c) Discuss the implications of the changes in the aging schedule from 2006 to 2007. CLICK HERE TO GET THE ANSWER !!!!

What are the essential features of the allowance method of accounting for bad debts?

Lauren Anderson cannot understand why the cash realizable value does not decrease when an uncollectible account is written off under the allowance method. Clarify this point for Lauren.

E8-5 Hachey Company has accounts receivable of $95,100 at March 31, 2007. An analysis of the accounts shows these amounts.

                                                                                                                                 Balance, March 31

                                                    Month of Sale                                                     2007                2006

                                                    March                                                                 $65,000            $75,000

                                                   February                                                               12,600                8,000

                                                   December and January                                        10,100                2,400

                                                   November and October                                          7,400                1,100

                                                                                                                               $95,100           $86,500

 

Credit terms are 2/10, n/30. At March 31, 2007, there is a $2,200 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company’s estimates of bad debts are as shown on page 402.

 

                                                                                                                       Estimated Percentage

                                                        Age of Accounts                                            Uncollectible

                                                        Current                                                             2%

                                                        1–30 days past due                                          7

                                                        31–90 days past due                                        30

                                                        Over 90 days                                                   50

Instructions

 

 

(a)    Determine the total estimated uncollectibles.

(b)    Prepare the adjusting entry at March 31, 2007, to record bad debts expense.

(c) Discuss the implications of the changes in the aging schedule from 2006 to 2007.

CLICK HERE TO GET THE ANSWER !!!!