Gnu Company began business January 1,2011.The company has a liberal credit policy and has been experiencing a high rate of uncollectible accounts.Due to the significance of this amount,the company uses the allowance method for accounting for bad debts.During 2011,credit sales were $400,000.The year-end accounts receivable balance was $170,000.
Part A: Assume that the company uses the sales method and estimates that 5% of credit sales will become bad debts.Select the column which represents the financial statement where the item will appear,and fill in the correct dollar amount:
Part B: Now assume that the company uses the accounts receivable method and estimates that 10% of accounts receivable will be uncollectible.Select the column which represents the financial statement where the item will appear,and fill in the correct dollar amount:

Question

Gnu Company began business January 1,2011.The company has a liberal credit policy and has been experiencing a high rate of uncollectible accounts.Due to the significance of this amount,the company uses the allowance method for accounting for bad debts.During 2011,credit sales were $400,000.The year-end accounts receivable balance was $170,000.
Part A: Assume that the company uses the sales method and estimates that 5% of credit sales will become bad debts.Select the column which represents the financial statement where the item will appear,and fill in the correct dollar amount:
  Part B: Now assume that the company uses the accounts receivable method and estimates that 10% of accounts receivable will be uncollectible.Select the column which represents the financial statement where the item will appear,and fill in the correct dollar amount:

Quizplus · Accepted Answer

The Answer of Gnu Company began business January 1,2011.The company has a liberal credit policy and has been experiencing a high rate of uncollectible accounts.Due to the significance of this amount,the company uses the allowance method for accounting for bad debts.During 2011,credit sales were $400,000.The year-end accounts receivable balance was $170,000.
Part A: Assume that the company uses the sales method and estimates that 5% of credit sales will become bad debts.Select the column which represents the financial statement where the item will appear,and fill in the correct dollar amount:
  Part B: Now assume that the company uses the accounts receivable method and estimates that 10% of accounts receivable will be uncollectible.Select the column which represents the financial statement where the item will appear,and fill in the correct dollar amount:

Gnu Company Began Business January 1,2011