Solve for trade accounts receivable, allowance for doubtful accounts, and prepare current assets section of balance sheet as of 12/31/04.
Ending Balance
Item - 12/31/03 - 12/31/04
Cash - $20,000 - $15,000
Trade accts rec - $40,000 - $???
Allowance for doubtful accts - $5,500 - $???
Inventories - $85,000 - $80,000
Current liabilities - $80,000 - $86,000
Total credit sales - $480,000 - $550,000
Collections on trade accts rec - $440,000 - $500,000
To solve for trade accounts receivable and allowance for doubtful accounts as of 12/31/04, we need to take into account the information provided and perform the necessary calculations.
Trade accounts receivable represents the amount of money owed by customers for goods or services that have been sold on credit. To find the ending balance of trade accounts receivable as of 12/31/04, we can use the following formula:
Ending Balance of Trade Accounts Receivable = Beginning Balance + Total Credit Sales - Collections on Trade Accounts Receivable
Plugging in the values, we have:
Ending Balance of Trade Accounts Receivable = $40,000 + $550,000 - $500,000 = $90,000
So, the ending balance of trade accounts receivable as of 12/31/04 is $90,000.
Next, we need to calculate the allowance for doubtful accounts. This account represents an estimate of the portion of trade accounts receivable that is expected to be uncollectible. To find the ending balance of the allowance for doubtful accounts, we can multiply the ending balance of trade accounts receivable by the estimated percentage of uncollectible accounts.
Assuming the estimated percentage for 12/31/04 remains the same as 12/31/03, we can calculate the allowance for doubtful accounts as follows:
Ending Balance of Allowance for Doubtful Accounts = Ending Balance of Trade Accounts Receivable * Percentage of Uncollectible Accounts
Using the given information, we can see that the percentage of uncollectible accounts is calculated as:
Percentage of Uncollectible Accounts = (Ending Balance of Allowance for Doubtful Accounts - Beginning Balance of Allowance for Doubtful Accounts) / (Ending Balance of Trade Accounts Receivable - Beginning Balance of Trade Accounts Receivable)
Plugging in the values, we have:
Percentage of Uncollectible Accounts = ($5,500 - $5,500) / ($40,000 - $40,000) = 0%
Since the percentage of uncollectible accounts is 0%, we can conclude that there is no provision for doubtful accounts as of 12/31/04.
To prepare the current assets section of the balance sheet as of 12/31/04, we include the following items and their respective ending balances:
- Cash: $15,000
- Trade Accounts Receivable: $90,000
- Allowance for Doubtful Accounts: $0 (based on the assumption of 0% uncollectible accounts)
- Inventories: $80,000
The current liabilities are given as $86,000.
Please note that without additional information, we cannot determine all the components of the current assets section of the balance sheet. The items included here are based solely on the information provided.