ACC 220 Lecture 51: 51 ACC 220 (8)

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orangegnat648

24 Feb 2019

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Companies often base their credit-granting policy on a customer"s credit score. Policy that establishes the amount of time a company"s customers may take before they are required to pay their outstanding accounts receivable. The company"s credit-collection policy includes any sales discount, the discount period, and the credit period. Credit losses are considered to be an operating expense of a business and recorded as a debit to an account called bad debt expense. The allowance method is a process of estimating and recording bad debts expense using an adjusting journal entry by crediting an account called. This account is a contra-asset account on the balance sheet. It reduces the amount of accounts receivable reported in the current period. The journal entry to write off an account receivable does not affect a company"s net income or total assets. Example: golly gizmos determines that ,000 of its accounts receivable is uncollectible and should be written off.

Related Questions

The amount of uncollectible accounts at the end of the year is estimated to be $25,000 using the aging of accounts receivable method. The balance in the Allowance of Doubtful Accounts account is an $8,000 credit before adjustment. Assuming no accounts are written off during the period, what will be the amount of bad debts expense for the period? A. $8,000. B. $17,000. C. $25,000 D. $33,000.

Information related to Hermesch Company for 2012 is summarizedbelow.

Total credit sales $2,200,000
Accounts receivable at December 31 825,000
Bad debts written off 33,000

What amount of bad debts expense will Hermesch Company report if ituses the direct writeoff method of accounting for bad debts?
$ ______

Assume that Hermesch Company estimates its bad debts expense to be2% of credit sales. What amount of bad debts expense will Hermeschrecord if it has an Allowance for Doubtful Accounts credit balanceof $4,000?
$ ______

Assume that Hermesch Company estimates its bad debts expense basedon 6% of accounts receivable. What amount of bad debts expense willHermesch record if it has an Allowance for Doubtful Accounts creditbalance of $3,000?
$ ______

Assume the same facts as in the question above, except that thereis a $3,000 debit balance in Allowance for Doubtful Accounts. Whatamount of bad debts expense will Hermesch record?
$ ______

Could you do all incorrect ones
P9-2A (a-d)

Information related to Hermesch Company for 2008 is summarizedbelow.
Total credit sales $2,200,000
Accounts receivable at December 31 825,000
Bad debts written off 33,000

Correct.

What amount of bad debts expense will Hermesch Company report if ituses the direct writeoff method of accounting for bad debts?
$ 33000

Correct.

Assume that Hermesch Company estimates its bad debts expense to be2% of credit sales. What amount of bad debts expense will Hermeschrecord if it has an Allowance for Doubtful Accounts credit balanceof $4,000?
$ 44000

Incorrect.

Assume that Hermesch Company estimates its bad debts expense basedon 6% of accounts receivable. What amount of bad debts expense willHermesch record if it has an Allowance for Doubtful Accounts creditbalance of $3,000?
$

Incorrect.

Assume that Hermesch Company estimates its bad debts expense basedon 6% of accounts receivable. There is a $3,000 debit balance inAllowance for Doubtful Accounts. What amount of bad debts expensewill Hermesch record?
$

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ACC 220 Lecture 51: 51 ACC 220 (8)

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