Reference no: EM132594476
Question - On December 31, 2015 Riegel Motors Co. reported "Accounts Receivable, net realizable value" of $5,440 on their balance sheet and "Allowance for Uncollectible Accounts" of $325 in their footnotes. Thus, the gross amount of accounts receivable is $5,765.
The company's sales grew dramatically in 2016, and the total credit sales, net of returns were $96,755. They collected cash from customers on account of $86,775. The company wrote off accounts of $425.
Management using the Accounts Receivable approach for estimating uncollectable accounts. Riegel credit terms are that accounts are due within 60 days. On December 31, 2016, Riegel found that 50% of the accounts were not past due, 25% were 60-90 days old, and 25% were over 90 days old. Riegel assesses the probability of collection as follows: not past due at 98%, 60-90 days past due at 96%, and over 90 days past due at 90%.
1. What is the total dollar amount owed to Riegel Motors Company by its customers at December 31, 2015?
2. What is the total dollar amount owed to Riegel Motors Company by its customers at December 31, 2016?
3. What is the balance in the allowance for uncollectible accounts at December 31, 2016?
4. What is the net realizable value of accounts receivable at December 31, 2016?
5. Show how the receivables would be reported on the balance sheet at December 31, 2016.
6. What amount will be reported for bad debts expense (i.e., provision for bad debts) on the income statement for the fiscal year ended December 31, 2016?
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