By what amount would net income differ if bad debt expense was computed using the percentage-of-receivables approach? Assume tha
t accounts written off were for sales in a prior year. Net income would be $Entry field with incorrect answer 2323416 Entry field with correct answer under the percentage-of-receivables approach.
1 answer:
Answer:
By following the Accountants Principle and Dicksons policy of debiting Bad debt accounts as Accounts are written off, the Net income would have been impacted negatively (reduced) by the write off from Prior period of $31,330 only
However, by following the % of receivables approach, a total of $31,330 (Write off from prior period) + $9,240 (current period provision for bad debt) will impact the Net Income negatively (reduced) = $40,570
Explanation:
Accounts receivable balance = $77,000
12% projected uncollectible debt = $9,240
Provision for bad debt under the % of receivables approach = $9,240
Amount written off related to prior year = $31,330
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Answer:
Budgeted purchase for January = $48,000
Explanation:
Opening stock of raw material = 2,000 pounds
Requirement for January = 4,000 units 2 per unit = 8,000 units
Also provided that inventory upto 25% of next month requirement is to be held, that is for 5,000 units of finished goods 5,000 2 = 10,000 units
25% = 2,500 units, of raw material is required.
Total purchase for January = Closing requirement + Current month requirement - Opening Stock = 2,500 + 8,000 - 2,000 = 8,500 units to be purchased
Total purchase cost = 8,000 units $6 = $48,000
Final Answer
Budgeted purchase for January = $48,000