Tutorial_Solution_-_Chapter_7__8 - P7-6Req. 1The beginning...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: P7-6Req. 1The beginning balance of trade receivables will increase by the amount of credit sales, and will decrease when cash is collected from customers or when accounts are written off as uncollectible. Accordingly, the balance of Trade receivables at December 31, 2012 is determined as follows:Beginning balance $ 500,000+ Credit sales1,000,000 Collections from customers(1,100,000) Write-off of uncollectible accounts(30,000)Ending balance$ 370,000Req. 2Allowance for doubtful accounts (-XA +A)........................30,000Trade receivables (A)....................................................30,000To record the write-off of trade receivables as uncollectible.Bad debt expense (+E -SE)..................................................27,200Allowance for doubtful accounts (+XA -A)27,200To adjust the balance of the Allowance for doubtful accounts and record bad debt expense for the year.Ending balance of Allowance account = $370,000 x 6% = $22,200 CrUnadjusted balance of the Allowance account ($25,000 $30,000) = 5,000DrAmount of adjustment needed = $27,200 Cr Req. 3Vital Inc.Partial Statement of Financial PositionAs at December 31, 2012Current Assets.Trade receivables$370,000Less: Allowance for doubtful accounts( 22,200)Net$347,800ORTrade receivables (net of allowance of $22,200)$347,800Req. 4The method being proposed by the bookkeeper is called the direct write-off method. The reasoning of the bookkeeper is quite appealing in the sense that it saves him and others time and effort in estimating the amount of receivables that may not be collected in the future. This simplistic approach would be acceptable if the amounts that are written off annually are...
View Full Document

This note was uploaded on 12/29/2011 for the course MANAGEMENT MGTB05 taught by Professor Georgequanfun during the Fall '11 term at University of Toronto- Toronto.

Page1 / 4

Tutorial_Solution_-_Chapter_7__8 - P7-6Req. 1The beginning...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online