F3 - Trade Receivables

Question 1

allowance method is(accrual method)

Answer 1

match expenses with revenues and to record the proper carrying amount for accounts receivable

Question 2

percentage-of-receivables method:

Answer 2

ending balance in the allowance account is equal to the total estimated uncollectible amount (AR x %) after use BASE to solve questions

Question 3

Foster Co. adjusted its allowance for uncollectible accounts at year-end. The general ledger balances for the accounts receivable and the related allowance account were $1,000,000 and $40,000, respectively. Foster uses the percentage-of-receivables method to estimate its allowance for uncollectible accounts. Accounts receivable were estimated to be 5% uncollectible. What amount should Foster record as an adjustment to its allowance for uncollectible accounts at year-end?

Answer 3

Under the percentage-of-receivables method the ending balance in the allowance account is equal to the total estimated uncollectible amount. Foster Co. would have a balance of $50,000 ($1,000,000 x 5%) in its allowance for uncollectible accounts at year end. Using the BASE format the adjustment would equal:

Allowance for uncollectible accounts:

Beginning balance (given)

$40,000

Add expense (squeezed)

10,000

Subtotal (added up)

50,000

Subtract write offs (none given)

0

Ending balance (calculated)

$50,000

Question 4

When question ask for adjust allowance for uncollectible accoutns at year end. What do you do?

Answer 4

Use BASE and we are solving for A (the addition the squeeze). We first find the Ending ADA by AR x %