Georgia Company reported accounts receivable of $16.5 million at the end of its2007 fiscal year. This amount was net of an allowance for doubtful accounts of $1,800,000.During 2008, Georgia sold $56.5 million of merchandise on credit. It collected $57.9 millionfrom customers. Accounts valued at $1,980,000were written off as uncollectible during2008.
Georgia's management estimates that10% of the year-end Accounts Receivable balance willbe uncollectible.
Required:
Answer each of the followingquestions:
A. What amount will Georgia report for accounts receivable and the allowance for doubtful accounts at the end of 2008?
B. What is the Doubtful Accounts Expensefor 2008?
C. How will the accounts receivable andallowance accounts be presented on thebalance sheet? Show the balancesheet.
D. Why do companies record expenses fordoubtful accounts based on estimatesfrom receivables or sales during the prior yearrather than recording the expenses when accounts are written off in a futureperiod?
E. If estimated uncollectibles as apercentage of sales or receivables were to increaseover several years, what information might thisprovide to decision makers?