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?