Question: The following information is taken from the financial records of Jones Company:
Net credit sales for 2014 $4,570,000
Accounts Receivable at January 1, 2014 390,000
Collections from customers for 2014 4,375,000
Write-offs due to non-collection for 2014 49,500
Allowance for Doubtful Accounts at January 1, 2014 39,500
a. If Jones estimates that 1.5% of net sales will become uncollectible, prepare the December 31,2014 entry to record the bad debt expense.
b. After the entry you made in part a., what is the balance in the Allowance for Doubtful Accounts?
c. Instead of using a percent of sales, now assume that Jones estimates that 11% of accountsreceivable will prove to be uncollectible. Prepare the December 31 entry to record bad debtexpense.
d. After the entry you made in part c., what is the balance in the Allowance for DoubtfulAccounts?
e. How does the information provided in the financial reports related to accounts receivableassist the investor in forecasting the future cash flow of a company?
f. Describe one potential recognition issue with accounts receivable. That is, describe when itmay be difficult to determine if an account receivable should or should not be recorded.