A company ages its accounts receivables to determine its end of period adjustment for bad debts. at the end of the current year,
management estimated that $15,750 of the accounts receivable balance would be uncollectible. prior to any year-end adjustments, the allowance for doubtful accounts had a credit balance of $375. what adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?
For the purpose of recording of bad debts expense on objective basis (i.e. using receivables aging), the closing balance amount of uncollectible allowance is to be <u>maintained</u> at certain amounts and the entry in the books of accounts is passed with the differential of the amounts.
In the given question, the company needs to have a closing balance of allowance for doubtful accounts against the receivables amounting to $ 15,750. However, the same account already shows a balance of $ 375. Therefore, an entry shall be passed with the difference of the above amounts i.e. $ 15,750 - $ 375 = $ 15,375
It is a process a business goes through in federal court. It is designed to help your business eliminate or repay its debt under the guidance and protection of the bankruptcy court.
2. Financial risk
it is the possibility of losing money on an investment or business venture. Some more common and distinct financial risks include credit risk, liquidity risk, and operational risk. Financial risk is a type of danger that can result in the loss of capital to interested parties.
3. Founder risk
it considers who the founders of the company are, if they get along, and how they will work for the company.
4.Product risk
it takes into account the engineers creating new product for the business and how they will recruit other product engineers.
The amount of interestrevenue the company will recognizes: For 2021 it will be $4680, for 2022 it will be $6240, and for the 2023 it will be $4680.
What is interest revenue? The income that an organisation receives from every investments it makes or on debt it owns is known as interest revenue. A business must record interest revenue underneath the accrual basis of accounting even if it has not yet received payment in cash for the interest as long as it has earned this same interest; this is done through an accrual journal entry. Interest revenue is only recorded under the cash basis of accounting when the entity receives a cash payment for interest.
For instance, if a business uses the accrual method of accounting, it might spend $10,000 on a certificate of deposit that yields 6% interest and generates $600 in interestincome after a year.
The amount of interest revenue the company will recognizes : 2021 => $52000 × 12% × 9/12 = $4680 2022 => $52000 × 12% × 12 = $6240 2023 => $52000 × 12% × 9 /12 = $4680