I-07.02 Problem

I-07.02 Problem - How should her summary entries appear(b...

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I-07.02 Myssie Cardenas was recently hired as the chief financial officer for Barajas Corporation. At the time Myssie was hired, the company had just completed the accounting cycle for the year ending December 31, 20X7. Myssie began her new job by reviewing the following information about sales and receivables activity during the year: Beginning accounts receivable $ 1,500,000 Beginning allowance for uncollectibles 40,000 Sales on account 6,000,000 Collections on account 4,800,000 Sales Discounts 68,000 Accounts written-off 33,000 Additions to allowance for uncollectible accounts 1% of net sales (a) Based on her review, Myssie prepared some handwritten notes in journal entry form summarizing the above sales, collections, discounts, write-offs, and additions to the allowance. She wanted to compare her entries to what had actually been recorded by the company.
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Unformatted text preview: How should her summary entries appear? (b) After completing her review, Myssie concluded that beginning in 20X8, the company would switch to a balance sheet approach for providing for uncollectible accounts. She estimates that the Allowance for Uncollectible Accounts should include an end-of-year balance equal to 3% of total gross receivables. Prepare summary journal entries for 20X8 to capture the following information, and to update the allowance account from its beginning of year balance (see part (a) to determine the beginning balance). Sales on account 6,600,000 Collections on account 5,900,000 Sales Discounts 88,000 Accounts written-off 53,000 (c) What is the objective in deciding which technique is appropriate for estimating uncollectibles? What factors perhaps influenced Myssie's decision to adopt a new technique?...
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