### question gt the ethan company provides you with the following information on decembe 4290224

Question

—> The Ethan Company provides you with the following information on December 31, 2015 as it prepares to close its books for the year

Accounts Receivable Balance (before write offs):                               \$7,891,500

Allowance for Doubtful Accounts Balance (before write offs):               212,000

Accounts deemed to be uncollectible:                                                      230,000

Bad Debt rate based on % of AR balance:                                                          4%

Net Credit Sales 2015:                                                                                      \$42,000,000

Bad Debt Rate Based on % of Credit Sales:                                                         1%

Required:

Assuming Ethan Co uses the balance sheet (AR balance) approach:

-Record the write off of uncollectible accounts.

-What is the new allowance for doubtful accounts balance after all adjustments?

-What is the bad debt expense, record the entry.

-What is the new Net Realizable Value of the receivable on the balance sheet?

-Repeat the exercise assuming Ethan Co uses the income statement approach.

—–> Morgan Company provides you with an aged accounts receivable balance as follows:

Days Outstanding        \$ Amount        Est % Uncollectible

0 -30                2,350,000                    3%

31-60               1,110,000                    7%

61-90                   750,000                   8%

91-120                 300,000                   10%

120+                    62,000                   100%

total 4,572,000

The current allowance for doubtful accounts balance before write-offs is \$91,000.

Required:

Assuming Ethan Co uses the balance sheet (AR balance) approach:

-Record the write off of uncollectible accounts.

-What is the new allowance for doubtful accounts balance after all adjustments?

-What is the bad debt expense, record the entry.

-What is the new Net Realizable Value of the receivable on the balance sheet?