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Topic
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Can someone please explain to me why they are removing accounts written of (40,000) and sales returns (75,000) when it is asking me for the A/R balance BEFORE allowances for sales returns and uncollectibles?
The following information relates to Jay Co.’s accounts receivable for Year 2:
Accounts receivable, 1/1/Year 2 $ 650,000
Credit sales for Year 2 2,700,000
Sales returns for Year 2 75,000
Accounts written off during Year 2 40,000
Collections from customers during Year 2 2,150,000
Estimated future sales returns at 12/31/Year 2 50,000
Estimated uncollectible accounts at 12/31/Year 2 110,000
What amount should Jay report for accounts receivable, before allowances for sales returns and uncollectible accounts, at December 31, Year 2?
a. $925,000
b. $1,085,000
c. $1,125,000
d. $1,200,000
Explanation
Choice “b” is correct, $1,085,000 (gross) accounts receivable, before allowances for (future) estimated sales returns and uncollectible accounts.
Gross A/R
Begin balance, 1/1/Year 2 $ 650
Add: credit sales 2,700
Sub Total 3,350
Less: collections (2,150)
Writeoffs (40)
Sales returns (75)
Ending balance, 12/31/Year 2 $ 1,085
FAR - 76! 10/15; (65) 7/15
BEC - 82! 11/15; (74) 8/15
AUD - 01/16
REG - TBA
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