Trade_Receivables_-_Solution

Trade_Receivables_-_Solution - As at December 31, 2010, ABC...

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Unformatted text preview: As at December 31, 2010, ABC Inc. has a $200,000 debit balance in Trade Receivables, and a $10,000 credit balance in Allowance for Doubtful Accounts (AFDA). During 2011, ABC Inc. had $5,000,000 in sales, 60% of which were on credit. They also collected $2,500,000 of their receivables and wrote off $40,000. a) Assume that ABC Inc. uses the balance sheet method for AFDA, using 3% of Trade Receivables as an uncollectable amount. Prepare the adjusting journal entry to be made for December 31, 2012. Calcul ation T r a d e R e c e i v a b l e beg sales collecte d wroteoff end Uncoll ectable @ 19 3% ,800 200 ,000 3,000 ,000 (2,500, 000) (40, 000) 660 ,000 AFDA beg writeoff C h a n g e r e q u i r e d 10, 000 (40,0 (30, 00) 000) 49,800 Journa l Entry B a d D e b t s E x p e n s e Allowance for Doubtful Accounts 49,80 0 49,80 0 b) Assume that ABC Inc. uses the income statement method for AFDA, using 1% of Credit Sales as an uncollectable amount. Prepare the adjusting journal entry to be made. Calcul ation Sales Credit % Credit Sales 1 % o f C r e d i t S a l e s 5,000 ,000 60% 3,000 ,000 30,000 Journa l Entry B a d D e b t s E x 30,00 0 p e n s e 30,00 Allowance for Doubtful Accounts 0 ...
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Trade_Receivables_-_Solution - As at December 31, 2010, ABC...

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