Question

oblem 4 (16 points) e Crowe Company offers 30 days of credit to its customers. At the end of the year, bad de pense is estimated and the allowance for uncollectible accounts is adjusted based on the agin ts receivable. The company began 2022 with the following balances in its accounts: Accounts Receivable Allowance for uncollectibles $350,000 $30,000 During 2022, sales on credit were $1,300,000, cash collections from customers were $1,253,000, write-offs were $25,000, and $1,000 in previously written-off accounts were recovered. Age of Receivable:1-60 days 61-120 days 121-180 days 2180 days $32,000 $10,000 25% 50% Amount receivable $250,000 Estimated uncollectible $80,000 1596 696 Required (show all computations): 1. Journalize both Crowe's write-offs and the recovery of previously written-off amounts: 2. Determine and record bad debt expense for 2022: 3. Determine the balance in accounts receivable at the end of 2022: me that Crowe instead uses the percentage of sales approach to estimate bad debts, and 4. Assu hat 4% of credit sales will prove to be uncollectable. Would net income in 2022 be higher or lower using the percentage of sales approach in comparison to your answer above using the aging m balance sheet under the percentage of sales approach. method and why? (i.) Also, neatly show how Crowe would report net receivables on the

Answer 1

Balance allowance for uncollectables	5000
Estimated uncollectable amount
Ag of receivables	Amount	Probablity	Estimated uncollectable amount
01-60	250000	0.06	15000
61-120	80000	0.15	12000
121-180	32000	0.25	8000
>180	10000	0.5	5000
			40000
Amount to be charged	35000
Journal	Debit	Credit
Bad debt	25000
Allowance for uncollectables		25000
Bank	1000
Bad debt recovered		1000
Balance Accounts receivable
Opening	350000
Credit Sale	1300000
Cash received	-1253000
Bad debt	-25000
	372000
Allowance based of propotion of credit sale	52000
Income will reduce in sales propotion is used