Hi ,
Answer (B) is correct. $68,000
The beginning balance of gross accounts
receivable (A/R) was $5,000 (debit). Thus, net beginning A/R
was $4,500 ($5,000 – $500 credit in the allowance for bad
debts). The allowance was credited for the $2,000 bad debt
expense. Accordingly, the ending allowance (credit) was $1,500
($500 – $1,000 write-off + $2,000). Given a $30,000 increase in
net A/R, ending net A/R must have been $34,500 ($4,500
beginning net A/R + $30,000), with ending gross A/R of $36,000
($34,500 + $1,500). Collections were therefore $68,000 ($5,000
beginning gross A/R – $1,000 write-off + $100,000 credit sales –
$36,000 ending gross A/R).
Gross A/R
$ 5,000 Beg. Bal. $ 1,000 Write-off
100,000 Cr. Sales 68,000 Collections
$ 36,000 End. Bal.
Answer (A) is incorrect because $64,000 equals credit sales
minus the ending gross accounts receivable. Answer (C) is
incorrect because $68,500 equals credit sales, minus the
increase in net accounts receivable, minus the ending
allowance. Answer (D) is incorrect because $70,000 equals
credit sales minus the increase in net accounts receivable.
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Muhammad Adil
Director/Manager
3306B Zigzag Tower Lagoona West Bay
Qatar
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Original Message:
Sent: 02-08-2020 04:18 AM
From: Sarah Christine Barbado
Subject: Problem 1
Correction to my first email: the amount of the beginning balance of accounts receivable and the credit sales, $5000 and $100,000, should be deducted from the sum of the gross amount of the ending balance of accounts receivable and the accounts written off, $30,500 and $1000.
Sarah
Sent from my iPhone
> On 8 Feb 2020, at 5:14 PM, Sarah Christine Barbado <<maskemail>barbadosarah@...</maskemail>> wrote:
>
> Hi Shreshtha!
>
> As per my calculation, we first have to solve for the ending balance of the Allowance for Bad debts that is subtracting the $500 beginning balance of the allowance (since this is a debit) and the $1000 write-off from the $2000 bad debt expense. Hence, the allowance for bad debts will have an ending balance of $500. This $500 ending balance of the allowance for bad debts should be added back to the $30,000 ending balance of the Accounts Receivable to arrive at the gross amount of the ending receivable of $30,500. Then, we will work the amounts back. We should add to the $30,500 the accounts written-off, $1000, and add back the beginning balance of accounts receivable and credit sales of $5000 and $100,000, respectively. Thus, we will get the collections for the year amounting to $73,500.
>
> Kindly notify me if there are errors in my analysis. Thank you so much!
>
> Sarah
>
> Sent from my iPhone
Original Message------
Hi Shreshtha,
as as per my calculation answer is 68000 (100000)-(30000+2000). Please correct me if any error. Will help to understand my mistake.
Thank you in advance for your reply.
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Nikunj Sheth
Controller
BRAMPTON ON
Canada
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