Crystal Lights Company manufactures and sells light

fixtures for homes #206

Crystal Lights Company manufactures and sells light fixtures for homes, businesses, and
institutions. All of its sales are made on credit to wholesale distributors. Information for Crystal
Lights for the current year follows:Total credit sales………………………………………. $3,500,000Uncolle
accounts written off in the year………… 17,500 Accounts receivable at December 31(after writing off
the uncollectible accounts above)…... 450,000Required:Assume that Crystal Lights estimates its
bad debts based on an aging analysis of its year-end accounts receivable, which indicates that
a provision for uncollectible accounts of $34,000 is required:a. If there is a debit balance of
$6,000 in its allowance for doubtful accounts on December 31, before adjustment,i. What
amount will the company report on its income statement as bad debts expense?ii. What amount
will it report on its balance sheet as the net value of its accounts receivable?b. If there is a
$6,000 credit balance in the allowance for doubtful accounts on December 31, before
adjustment,i. What amount will the company report on its income statement as bad debts
expense?ii. What amount will it report on its balance sheet as the net value of its accounts
receivable?Assume that Crystal Lights decides to estimate its bad debts expense at 1% of
credit sales:c. If there is a debit balance of $6,000 in its allowance for doubtful accounts on
December 31, before adjustment,i. What amount will the company report on its income
statement as bad debts expense?ii. What amount will it report on its balance sheet as the net
value of its accounts receivable?d. If there is a $6,000 credit balance in the allowance for
doubtful accounts on December 31, before adjustment,i. What amount will the company report
on its income statement as bad debts expense?ii. What amount will it report on its balance
sheet as the net value of its accounts receivable?Assume that Crystal Lights uses the direct
write-off method of accounting for bad debts:e. What amount will the company report on its
income statement as bad debts expense?f. What amount will it report on its balance sheet as
the net value of its accounts receivable?g. Briefly outline the main advantages of the allowance
method of accounting for bad debts.View Solution:
Crystal Lights Company manufactures and sells light fixtures for homes

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