Reference no: EM132780503
ABC Corporation provides the information in the table below for the year ended 12/31/2019. Use this information to answer questions A and B in each of the two independent scenarios presented in 1 and 2 following the table.
2019
Allowance for Doubtful Accounts, Beginning Balance, credit $100,000
Bad debt write-offs during the year 110,000
Total Credit sales for the year 12,000,000
Accounts receivable with balances not yet due at year end 900,000
Accounts receivable with balances past due 1-90 days at year end 200,000
Accounts receivable with balances past due 91+ days at year end 100,000
Problem 1. Assuming ABC Corporation uses the "Percentage of Credit Sales" method to estimate bad debt and that DEF expects 1% of credit sales to result in bad debts:
A) What amount would ABC show as "Bad Debt Expense" on its 2019 income statement?
B) What amount would ABC show as "Accounts Receivable, Net" on its 2019 balance sheet?
Problem 2. Assuming ABC Corporation uses the "Aging of Accounts Receivable" method to estimate bad debt and that DEF estimates probable bad debt loss rates of: 1% of not yet due accounts, 10% of 1-90 days past due accounts and 20% of 91+ days past due accounts:
A) What amount would ABC show as "Bad Debt Expense" on its 2019 income statement?
B) What amount would ABC show as "Accounts Receivable, Net" on its 2019 balance sheet?