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 Topic: A/R Calculation Ch.4 Becker ( Topic Closed)
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chantel916
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| Posted: 30 Jan 2011 at 23:19 | IP Logged
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In its December 31, Year 1, balance sheet, Fleet Co. reported accounts receivable of $100,000 before allowance for uncollectible accounts of $10,000. Credit sales during Year 2 were $611,000, and collections from customers, excluding recoveries, totaled $591,000. During Year 2, accounts receivable of $45,000 were written off and $17,000 were recovered. Fleet estimated that $15,000 of the accounts receivable at December 31, Year 2, were uncollectible. In its December 31, Year 2, balance sheet, what amount should Fleet report as accounts receivable before allowance for uncollectible accounts?
a. $58,000
b. $67,000
c. $75,000
d. $82,000
Explanation
Choice "c" is correct. The question requires the determination of accounts receivable before the allowance for uncollectible accounts. The calculation of the accounts receivable balance is:
B Beginning: A/R 1/1/Year 2 $100,000
A Additions: Credit sales 611,000
Recoveries 17,000
S Subtracts: Collections (591,000)
Collections (Recovery) (17,000)
Written-off A/R (45,000)
E Ending: A/R 12/31/Year 2 $ 75,000
Ok - So i may be looking too much into this, but why are we adding recoveries, then again subtracting recoveries? I just added and got 92k. I don't understand why we would subtract them again. Do we subtract to avoid double counting???
__________________
B - Passed!
A - Passed!
R - Passed!
F -
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chantel916
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| Posted: 30 Jan 2011 at 23:34 | IP Logged
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Nevermind, RTFQ - we recovered 17k so add it in, but technically when we recover we are recovering and collecting cash so we subtract the cash received of 17k, to net to 0.
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B - Passed!
A - Passed!
R - Passed!
F -
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ATLsFTP
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| Posted: 02 Nov 2011 at 13:29 | IP Logged
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To clarify, the tricky part for me was to understand that the $17,000 had already been written-off per the allowance method (included in the $45,000 write-off). Once you understand that you can then (1) restore the write-off (the addition in the solution - DR: AR, CR: Allowance) and then (2) record the cash collection (the subtraction in the solution - (DR: Cash, CR: AR).
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