Accounting Records of Sine

Accounting Records of Sine in $29 Only

The accounting records of Sine. Com Limited provided the following for 20X9:

Balance in accounts receivable, 1 January 20X9 ……….. $ 90,000

Balance in accounts receivable, 31 December 20X9………. 120,000

Balance in allowance for doubtful accounts, 1 January 20X9…. 3,000  (cr.)

Accounts already written off as uncollectible during 20X9……. 5,500Cash sales were $ 900,000, while credit sales were $ 650,000. Recently, Sine. Com’s management has become concerned about various estimates used in its accounting system, including those relating to receivables and uncollectible accounts. The company is considering various alternatives with a view to selecting the most appropriate approach and related estimates. For analytical purposes, the following 20X9 alternative estimates have been developed for consideration:a. Bad debts approximate 0.75% of credit sales.

b. Bad debts approximate 0.4% of total sales.

c. Six percent of the uncollected accounts receivable at year- end will be uncollectible.

d. Aging of the accounts receivable at the end of the period indicated that 80% would incur a 2% loss, while the remaining 20% would incur a 10% loss.

Required: 

1. For each of the four alternatives listed above, give the following:

a. 20X9 adjusting entry

b. Ending 20X9 balance in the allowance account

c. An evaluation of the alternative

2. Explain which of the four alternatives you would recommend.

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