Question

The manda panda company uses the allowance method to account for bad debts. at the beginning of 2016, the allowance account had a credit balance of $75,000. credit sales for 2016 totaled $2,400,000 and the year-end accounts receivable balance was $490,000. during this year, $73,000 in receivables were determined to be uncollectible. manda panda anticipates that 3% of all credit sales will ultimately become uncollectible. the fiscal year ends on december 31. required: 1. does this situation describe a loss contingency? no yes

Answer 1

The answer is "Yes, this is a loss contingency".
Some loss contingencies don't include liabilities by any means. A few possibilities or contingencies when settled reason a non-cash advantage for be impeded, so it implies lessening the related resource as opposed to recording an obligation. The most widely recognized loss contingency of this kind is an uncollectible receivable, as portrayed in this circumstance.