At January 1, 2014, Famous Thirty Three Company reported accounts receivable of

Question

At January 1, 2014, Famous Thirty Three Company reported accounts receivable of $100,000 and the allowance for doubtful accounts had a $15,000 credit balance. Famous Thirty Three Company records bad debt expense using the net credit sales method and estimates that 5% of its credit sales each year will prove to be uncollectible. Famous Thirty Three Company reported the following information for 2014 and 2015:

2015 2014

Sales revenue $428,000 ?

Cash collections from customers $410,000 $370,000

Accounts receivable at December 31 ? ?

Allowance for doubtful accounts at December 31 $59,600 $29,900

Write-offs ? $9,400

Recoveries ? $4,700

At December 31, 2015, Famous Thirty Three Company's net realizable value of accounts receivable totaled $67,200. Calculate the amount of recoveries recorded by Famous Thirty Three Company in 2015. Do not use decimals in your answer.

Explanation / Answer

Recoveries = $3,800

First we need to completed 2014 chart

Allowance opening 15,000 + 4700 recoveries - written off $9,400 = $10,300

balance in allowance of 2014 is 29,900 therefore allowance created for (29,900 - 10,300) = $19,600

Allowance is 5% of net sales

hence sale of 2014 = 19,600/5% = $392,000

Now with help of sale we can calculate a/c receivable balance on dec 31,2014

opening 100,000 + sales 392,000 - collections 370,000 - write offs $9400 = $112,600

Now caluculate account receivable for 2015

openng 112,600 + 428,000 sales - collection 410,000 - closing balance(67,200+59,600) = 3,800 recovery

Allowance is 5% of net sales

hence sale of 2014 = 19,600/5% = $392,000

Now with help of sale we can calculate a/c receivable balance on dec 31,2014

opening 100,000 + sales 392,000 - collections 370,000 - write offs $9400 = $112,600

Now caluculate account receivable for 2015

openng 112,600 + 428,000 sales - collection 410,000 - closing balance(67,200+59,600) = 3,800 recovery

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