| Author |
|
IrvineCPA
Contributor
Joined: 10 Feb 2009
Online Status: Offline
Posts: 82
|
| Posted: 19 Jul 2009 at 10:58 | IP Logged
|
|
|
An internal auditor is deriving cash flow data based on incomplete set of facts. Bad debt expense as $2,000. Additional data for this period follows:
Credit sales $100,000
Gross AR – Beg $5,000
Allowance for bad debt (500)
AR written off $1,000
Increase in net AR (after
Subtraction of allowance
For bad debts) $30,000
How much cash was collected this period on credit sales ?
- 68,000
- 70,000
- 68,500
- 64,000
Answer is A. This problem from Gleim, SU#6. I am having trouble figuring out the Ending AR Balance.
__________________
BEC 3x 76 Expires Dec 09
REG 2x passed 78 April 09
AUD 1x passed 76 March 09
FAR - 1x May 25, 09 73
|
| Back to Top |
|
| |
CPA08va
Regular
Joined: 26 Apr 2008
Location: United States
Online Status: Offline
Posts: 116
|
| Posted: 19 Jul 2009 at 15:42 | IP Logged
|
|
|
Bad debt Exp DR 2000, Allow for uncollectible CR 2000 when estimating loss at beg of year
Subsequently reduced estimate by $1500 by bringing the allowance balance to 500 from 2000, so bad debt expense reduced by 1500
Allowance for uncollectible had to be DR 1000, as Accounts receivable was CR 1000 (actual loss)
Gross Beg A/R was 5000, so net beg A/R was 3000. You increased this by 30,000 and then wrote it down by 1,000 resulting in ending AR being 32,000. 100,000 in credit sales - 32,000 in ending AR is 68,000 in cash collected.
I think that's how they got 68 but I am not sure either - took me a while to figure it out.
__________________
AUD - 88
BEC - 85
REG - 86
FAR - 85
|
| Back to Top |
|
| |
Zeratul
Major Contributor
Joined: 11 Jun 2009
Online Status: Offline
Posts: 987
|
| Posted: 19 Jul 2009 at 15:42 | IP Logged
|
|
|
I hate these problems.
Anyways, using a bit of reverse engineering, we can figure out what the ending balance should be:
5,000+100,000-1,000-68,000=36,000 ending gross A/R
Ending Net A/R=5,000-500+30,000=34,500
36,000-34,500=1,500 allowance for bad debts
Now let's go about seeing how we would figure this out from the problem:
Beginning ABD: 500
A/R write-off: (1,000)
Bad debt expense: 2,000
Ending ABD: 1,500
Someone please verify; I'm not 100% sure about this.
|
| Back to Top |
|
| |
IrvineCPA
Contributor
Joined: 10 Feb 2009
Online Status: Offline
Posts: 82
|
| Posted: 19 Jul 2009 at 17:13 | IP Logged
|
|
|
Gliem solution is suggesting an ending AR of 36,000. I still don't understand how to get there !
I am having to double count the allowance of $500 twice to get to 36,000.
__________________
BEC 3x 76 Expires Dec 09
REG 2x passed 78 April 09
AUD 1x passed 76 March 09
FAR - 1x May 25, 09 73
|
| Back to Top |
|
| |
Zeratul
Major Contributor
Joined: 11 Jun 2009
Online Status: Offline
Posts: 987
|
| Posted: 19 Jul 2009 at 17:29 | IP Logged
|
|
|
OK, so I was right.
Here's how you do this.
First, you can find Net A/R from the information in the problem:
Beginning Net A/R: 5,000 gross A/R-500 ADB=4,500
Change in Net A/R: 30,000
Ending Net A/R: 30,000+4,500=34,500
Beginning ADB: 500
Writeoff of A/R: (1000)
Bad debt expense: 2,000
500-1000+2000=1,500 Ending ADB
34,500 Ending net A/R+1,500 ending ADB=36,000 Ending gross A/R
|
| Back to Top |
|
| |
|
|
Active Topics 
Memberlist 
Search 
Help
Register 
Login
Topic: Cash collected from credit sales problem
Topic Closed)
