hochapter7

hochapter7 - Lets do a complete a/r allowance activity...

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Lets do a complete a/r allowance activity project! Prepare a balance sheet and income statement for the following as of and for the three month period ending March 31: Make sales to customers in January, February and March totaling $4,850,000. Terms 2/10 net 30. Allowance for doubtful accounts at BOY is $575,000. Inventory at the beginning of the period is $5,000,000, purchases were $2,000,000 and ending inventory is $4,000,000. Loss incurrence rate over trailing twelve months (ttm) is 1%. Management writes off $100,000 of receivables in the ordinary course. Management reviews the accounts receivable at the end of March and notes that an old receivable from prior year sales in the amount of $1,000,000 is from a customer which is no longer in existence. Management concludes that the allowance against current period sales still appears appropriate and that an additional $500,000 of expense is justified for this item (b/c there was already $500,000 in the reserve account at the beginning of the year). The old customer balance should be written-off.
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hochapter7 - Lets do a complete a/r allowance activity...

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