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Chapter Seven Discussion – Uncollectible Accounts & Estimating Allowance
For chapter 7, please respond to the three items below.
Please do not repeat the questions in your response.
1. Describe the two basic approaches to estimating uncollectible accounts under the allowance method and the rationale for each.
2. Find an example on Edgar for how a public company discloses its practice for estimating allowance for uncollectible accounts. You may choose any company, and you will find the information in a company’s 10-K, “Notes to the Financial Statements,” in the first disclosure note “Summary of Significant Accounting Policies.” Describe how your example company estimates its allowance for uncollectible accounts.
3. Which basic approach to estimating do you think your example company is using?
After you have answered these questions clearly, please comment on at least one classmate’s post. The best responses are thoughtful, show that you have considered the topic, relate your similar experience or provide advice or guidance to another student.
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VALLEY MERCHANDISING CORP Income Statement For the Year Ended 12-31-20 ($ in millions) |
|
|
Sales revenue |
75 |
|
Cost of goods sold |
(30) |
|
Depreciation expense |
(5) |
|
Remaining expenses |
(35) |
|
Net Income |
5 |
|
VALLEY MERCHANDISING CORP Balance Sheet As of 12-31-20 ($ in millions) |
|
|
Cash |
1 |
|
Accounts receivable |
20 |
|
Inventory |
15 |
|
Property, Plant & Equipment |
44 |
|
Total Assets |
80 |
|
Accounts payable |
2 |
|
Accrued current expenses payable |
7 |
|
Long term notes payable |
36 |
|
Common stock |
30 |
|
Retained earnings |
5 |
|
Total liabilities and Equity |
80 |