question archive Power One, Inc

Power One, Inc

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Power One, Inc. uses the allowance method for bad debts and adjusts the allowance for uncollectible accounts to a desired amount based on an aging of accounts receivable. At the beginning of? 2011, the allowance account had a balance of $(24,500?). During? 2011, credit sales totaled $500,000 and receivables of $18,000 were written off. The? year-end aging indicated that a $28,000 allowance for uncollectible accounts was required.

1. Record the transactions?(including the beginning? balances) into the accounting equation.

2. What is the bad debts expense for? 2011?

3. What information will be disclosed on the balance sheet at year? end?

4. What information does this provide someone who is evaluating the? firm's annual?performance?

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Answer:

1. Record the transactions?(including the beginning? balances) into the accounting equation.

  Balance Sheet Income Statement
  Assets Equity Revenue Expense net income
  Accounts receivable Allowance for uncollectible accounts Retained earnings      
Beginning balance   $       (24,500)        
Credit sales $        500,000   $        500,000 $        500,000   $        500,000
Account written off $        (18,000) $       (18,000)        
Unadjusted balance $        482,000 $       (42,500) $        500,000 $        500,000 $                 -   $        500,000
             
Unadjusted balance $        482,000 $       (42,500) $        500,000 $        500,000 $                 -   $        500,000
Bad debts expense (28000+42500)   $          70,500 $        (70,500)   $        70,500 $        (70,500)
Adjusted balance $        482,000 $          28,000 $        429,500 $        500,000 $        70,500 $        429,500

2. What is the bad debts expense for? 2011?

Bad debts expense for?2011   $          70,500

3. What information will be disclosed on the balance sheet at year? end?

Accounts receivable $        482,000  
Less: Allowance for uncollectible accounts $        (28,000)  
Accounts receivable, net   $       454,000

4. What information does this provide someone who is evaluating the? firm's annual?performance?

Net accounts receivable does this provide information how much accounts receivale will be collections possiable.

It also provides the amount of uncollectible accounts.

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