Discuss the rationale for using the allowance method based

Assignment Help Accounting Basics

Reference no: EM13584835

Part 1 On July 1, 2010, Wallace Company, a calendar-year company, sold special-order merchandise on credit and received in return an interest-bearing note receivable from the customer. Wallace Company will receive interest at the prevailing rate for a note of this type. Both the principal and interest are due in one lump sum on June 30, 2011. When should Wallace Company report interest revenue from the note receivable? Discuss the rationale for your answer.

Part 2 On December 31, 2010, Wallace Company had significant amounts of accounts receivable as a result of credit sales to its customers. Wallace uses the allowance method based on credit sales to estimate bad debts. Past experience indicates that 2% of credit sales normally will not be collected. This pattern is expected to continue.

(a) Discuss the rationale for using the allowance method based on credit sales to estimate bad debts. Contrast this method with the allowance method based on the balance in the trade receivables accounts.

(b) How should Wallace Company report the allowance for doubtful accounts on its balance sheet at December 31, 2010? Also, describe the alternatives, if any, for presentation of bad debt expense in Wallace Company%u2019s 2010 income statement.

Reference no: EM13584835

Questions Cloud

What is a personal model of leadership what approach should : what is a personal model of leadership? what approach should i take to complete my personal leadership model? what do i

Through ethics involves our professional relationship to : through ethics involves our professional relationship to clients and our society at larte eithical challenges and how

Do you believe this firms quality initiatives have been : consider the following quality cost reportyear 1year 2year 3prevention177516501650appraisal250025002500internal

Below you are given ages that were obtained by taking a : below you are given ages that were obtained by taking a random sample of 9 undergraduate students. assume the

Discuss the rationale for using the allowance method based : part 1 on july 1 2010 wallace company a calendar-year company sold special-order merchandise on credit and received in

Recognizing being a health care provider as a ministry of : recognizing being a health care provider as a ministry of service what are ways a health care provider can prepare to

A client comes to your tax firm she asks you to research a : a client comes to your tax firm. she asks you to research a tax issue and advise her on how to reduce her exposure to

The makers of a soft drink want to identify the average : the makers of a soft drink want to identify the average age of its consumers. a sample of 55 consumers was taken. the

Zorn conducted his professional practice through zorn inc : zorn conducted his professional practice through zorn inc. the corporation uses a fiscal year ending september 30 even

User Account

All Pages