Prepare the adjusting entry to record the lifetime expected credit losses for this customer on 31 December 20X7: Prepare the adjusting entry to record the lifetime expected credit losses for this customer on 31 March 20X8:
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Assume a company has an accounts receivable balance from a customer totalling $41,000.
Based on an analysis of the risk, timing and, expected
31 December 20X7: The company expects to be able to collect $26,000 from the customer.
31 March 20X8: The receivable has still not been collected, and the company expects they will only be able to collect $18,000.
Required:
Prepare the
Prepare the adjusting entry to record the lifetime expected credit losses for this customer on 31 March 20X8:
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