[vvSPAZvv]

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

[EuroAddict]

Because those were the actual returns, not the allowance. Have to read the Q's very carefully.

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[Author]

Replies