Slow Running Shoes uses the Aging of receivables method to account for uncollectible accounts.
The company completed the following transactions during 2010 and 2011:
2010
June 10th
Wrote off the balance of $600 from Manny Miller’s account as uncollectible
September 15th
Re-instated the account of Betty Lou and recorded the collection of $1200 as payment in full for her account which had been written off earlier
December 31st
Recorded the uncollectible account expense based on the aging schedule. The schedule showed that $14,100 of accounts receivable was estimated as uncollectible
Made the closing entry for the uncollectible expense account
2011
Jan 17
Sold inventory to Jack Frost, $1100, on account
August 15
Wrote off as uncollectible the accounts of Barry Semper, $1,500; Maria Jesus $1,400 and Rory Paul $200
September 26
Received 40% of the amount owed by Jack Frost and wrote off the remainder as uncollectible
October 16
Received 20% of the funds owed from Maria Jesus as part payment of her account which had been written off earlier as uncollectible
December 31
The Aging schedule showed an estimated $7500 as uncollectible
Required:
4. Assume that the percentage of sales method was used instead by the company and that on December 31st, 2010 5% of 2010 ‘s credit sales are estimated to be uncollectible. Assume Sales for 2010 were 520,000 (60% relates to cash sales)
You are now required to:
(ii) Prepare the balance sheet extract to show the net realizable value of the Accounts Receivable as at December 31 2010
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