211c7m7

# 211c7m7 - Introduction to Financial Accounting Chapter 7...

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Introduction to Financial Accounting AMIS 211 – Professor Marc Smith 1 Chapter 7, Module 7 Chapter 7, Module 7 Slide 1 AMIS 211 Introduction to Financial Accounting Professor Marc Smith Chapter 7 Module 7 Chapter 7 Module 7 Hi everyone. Welcome back. Let’s go ahead and let’s get a little bit more practice with this bad debt estimation. And, let’s look at Example #4 from the Web site problems. And, this one is going to be a little bit more involved. Notice the name of the problem: Comprehensive Bad Debt Problem. We are going to basically take all that we have learned so far about bad debts and Accounts Receivable and let’s lump them into this one example. And, let’s see if we can work our way through it. Let’s look at the example together. Here is what it says:

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Introduction to Financial Accounting AMIS 211 – Professor Marc Smith 2 Chapter 7, Module 7 “Grandma Veazy’s House of Fun has compiled the following information to help in determining its year-end estimate of bad debt expense.” Here is the information they tell us: Our Credit Sales for the year. They tell us the Sales Returns and Allowances for the year. They tell us what Accounts Receivables were at the end of the year. They tell us the Allowance for Doubtful Accounts at January 1 st —the beginning of the year—had a credit side balance. And then, they tell us about write-offs and recoveries that happened during the year. Part A says: “Let’s assume Grandma Veazy’s House of Fun is using the Net Credit Sales Method and estimates her bad debt expense to be 4% of Net Credit Sales.” “Calculate the bad debt expense estimate and the Net Realizable Value (NRV).” Let’s go ahead to the next slide and let’s jump right into it.
Introduction to Financial Accounting AMIS 211 – Professor Marc Smith 3 Chapter 7, Module 7 Slide 2 Chapter 7 Module 7: Example #4, Part A Part A: Net Credit Sales Method 1. Bad debt expense = Net credit sales x % 500,000 x .04 Å NOT CORRECT Bad debt expense = (500,000 - 18,000) x .04

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211c7m7 - Introduction to Financial Accounting Chapter 7...

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