Question

Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2018, accounts receivable totaled 625,000. The allowance method is used to account for uncollectible account. The allowance for uncollectible accounts had a credit balance of 32000 at the beginning of 2018 and 21000 in receivables were written off during the year as uncollectible. Also, 1200 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 10% to account receivable at the end of the year.How would accounts receivable be shown in the 2018 year end balance sheet?

Answer 1

Answer:

Explanation:

The account receivable shown in the year-end balance sheet would be presented below:

Particulars                                            Amount              

Assets

Current Assets

Accounts receivable                             $625,000

Less: Allowance for doubtful debts     ($62,500)

Net accounts receivable                       $562,500

The allowance for doubtful debts is computed below:

= Accounts receivable × given percentage

= $625,000 × 10%

= $62,500