Question

Estimating Uncollectible Accounts and Reporting Receivables over Multiple Periods Barth Company, which has been in business for three years, makes all of its sales on credit and does not offer cash discounts. Its credit sales, customer collections, and write-offs of uncollectible accounts for its first three years follow: Year Sales 2015 $375,500 2016 438.000 2017 486,000 Accounts Collections Written Off $366,500 $2,650 432,000 2.900 469,000 3.250 Barth uses the allowance method of recognizing credit losses that provides for such losses at the rate of 1 % of sales. (This means the allowance account is increased by 1 % of credit sales regardless of any write- offs and unused balances.) What amount for accounts receivable is reported on its balance sheet at the end of 2017? $ 4,800 x What total amount of bad debts expense appears on its income statement for each of the three years? 2015 $ 6,350 x 2016 $ 9,450 2017 $ 23,200 * x What amount for allowance for uncollectible accounts is reported on its balance sheet at the end of 2017? $ 23,200 x

Answer 1

Solutions:

1. Amount of Accounts Receivable is reported on its balance sheet at the end of 2017?

$23200

2. Total Amount of Bad Debts

2015 = $3755

2016 = $4380

2017 = $4860

3. Uncollectible Account Balance at the end of 2017

($12995 - 8800) = $4195

Calculations:

Year	Sales	Colections	Amounts Written off	Balance of Accounts Receivables	Allowance for Doubful Debts 1% of Credit Sales
2015	375500	366500	2650	6350	3755
2016	438000	432000	2900	3100	4380
2017	486000	469000	3250	13750	4860
Total	1299500	1267500	8800	23200	12995

Balance in Accounts receivables = Sales - Collections - Amount written off

Allowance for Doubtful Debts = Sales *1%

Allowance is the Bad Debt Expense each year