Problem 774 From its rst day of operations to December 31, 2017, Bramble Corp. provided for uncollectible accounts receivable under the allowance...
Problem 774 From its first day of operations to December 31, 2017, Bramble Corp. provided for uncollectible accounts receivable under the allowance method: entries for bad debt expense were made monthly based on2.40% of credit sales, bad debts that were written off were charged to the allowance account, recoveries of bad debts previously written off were credited to the allowance account, and no year-endadjustments were made to the allowance account. Bramble's usual credit terms were net 30 days. and remain unchanged. The balance in Allowance for Doubtful Accounts was $183,600 at January 1., 2017. During 2017, credit sales totalled $9.25 million, interim entries for bad debt expense were based on 2.40% of credit sales.$94,500 of bad debts were written off, and recoveries of accounts previously written off amounted to $14,800. Bramble upgraded its computer facility in November 2017, and an aging of accounts receivable was prepared for the first time as at December 3]., 2017.A summary of the aging analysis follows: Classificafion by Month ofSale Balance in Each Category Estimated My llncolleclible Novem ber—December 2017 $ 1,086,000 8% July-October 2017 646,000 12.8% January-June 2011' 418,500 22% Before January 1, 201? 147,000 59%$2,297,500 Based on a review of how collectible the accounts really are in the “Before January 1, 2017" aging category, additional receivables totalling $67,400 were written off as at December 31, 2017. The 59%uncollectible estimate therefore only applies to the remaining $79,600 in the category. Finally, beginning with the year ended December 31, 2017, Bramble adopted a new accounting method for estimating the allowance for doubtful accounts: it now uses the amount indicated by the year-end aging analysis of accounts receivable.
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