Chapter 4 .docx

Chapter 4 .docx - Do the 2016 Midterm when you feel ready...

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- Do the 2016 Midterm when you feel ready - Review session 6-8 Wednesday (ONLINE) - Extra TA Office Hours *Cash is not present in Adjusting Entries Balance Sheet A/R XXX Less: Allowance XXX Net Realizable Value of A/R % of Sales method tells you the Bad Debt Expense -How much money to put into the account Aging Method tells you the Ending Balance -How much money you would like left over EXAMPLE OF % OF SALES METHOD (refer to Martin Company powerpoint) 2% of 150,000 = $3,000 = Bad Debt Expense Bad Debt Expense 3000 Allowance 3000 Allowance 2000 A/R 2000 *This is a Write-Off 3000 - 2000 = 1000, which is the Ending Balance for Allowance Account Beg. Balance Bad Debt Expense Reversal Ending Balance Write Off Collections Write Off BB Sales Reversal Ending Balance A/R Allowance
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EXAMPLE OF THE AGING METHOD (refer to table in powerpoint) Total Balance, adding up the table is the Ending A/R Probability of Default (the %) Multiply the % by the Balance 1,900,000 x 1% = 19,000 (Adding up the total, the amount will be 55,000) What you feel will default I need 55,000 - 6900 MORE to set aside for estimated default
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