Question

Calistoga Produce estimates bad debt expense at ½% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2012. During 2013, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off.

Calistoga's accounts receivable at December 31, 2013, are: A. $467,000. B. $473,280. C. $465,280. D. $469,280.

Calistoga's 2013 bad debt expense is: A. $1,720. B. $1,650. C. $1,505. D. $1,575.

Calistoga's adjusted allowance for uncollectible accounts at December 31, 2013, is: A. $1,575. B. $1,505. C. $1,650. D. $1,720.

Answer 1

Answer and Explanation:

i)Calistoga account receivable at December 31, 2013

= Account receivable at Dec’31 2012 + Credit sales on 2013 – collections on 2013 – write off account receivable

= $471,000 + $315,000 – $319,000 – $1,720

= $465,820

C. $465,280

ii) Calistoga's 2013 bad debt expense is = ½ % of credit sales

                                                                   = $315,000*0.5%

                                                                   = $1,575

D.$1,575

iii) Bad debt expenses = $315,000*0.5%

                                     = $1,575

Balance in allowance for uncollective account

= $1,650 - $1,720

= $ - 70

Adjusted allowance for uncollective account at Dec,31 2013

= $1,575 – 70

= $1,505

B. $ 1,505