L05 E545 Estimating Uncollectible Accounts and Reporting Rec

L05 E5-45. Estimating Uncollectible Accounts and Reporting Receivables over Multiple Periods Weiss Company, which has been in business for three years, makes all of its sales on credit and does not offer cash discounts. Itsedit sales, customer collections, and write-offs of uncollectible accounts for its first three years follow Year Sales Collections Accounts Written Off . $733,000 2015... 857,000 945,000 $716,000 842,000 928,000 $5,300 5,800 6,500 2016. . . . a. Weiss recognizes bad debts expense as 1% of sales. (Hint: This means the allowance account is in creased by 1% of credit sales regardless of any write-offs and unused balances.) What does Weiss. 2013 balance sheet report for accounts receivable and the allowance for uncollectible accounts? What total amount of bad debts expense appears on Weiss\' income statement for each of the three years? Module 5 I Revenue Recognition and Operating Income 5-44 b. comment on the appropriateness of the 1% rate used to provide for bad debts based on your analysis in part a.

Solution

Uncollectible accounts Bad debt expense Written off at end 2015 733000*1% 7330 5300 2030 (7330-5300) 2016 857000*1% 8570 5800 4800 (2030+8570-5800) 2017 945000*1% 9450 6500 7750 (4800+9450-6500)