80.2K

Verified Solution

Link Copied!

E$7\mathrm{.}9($LO $5)($Calculating Bad Debts and Preparing Journal Entries$)$ The trial balance before

adjustment of Chloe Inc., reporting under ASPE, includes the following balances:

Instructions

a$.$ Prepare the entry for bad debt expense for the current year for each of the following scenarios:

The allowance should be $4\%$ of gross accounts receivable.

Historical records show that, based on accounts receivable aging, the following percentages will

not be collected:

Allowance for Doubtful Accounts is $$1,950,$ but it is a credit balance and the allowance should be

$4\%$ of gross accounts receivable.

Allowance for Doubtful Accounts is $$1,950,$ but it is a credit balance and historical records show

that the same percentages in part $2$ are to be used to determine the Allowance for Doubtful Ac$-$

counts.

b$.$ From the perspective of an independent reviewer of Chloe's trial balance, comment on the unad$-$

justed debit balance in Chloe's allowance for doubtful accounts at year end.

c$.$ Digging Deeper Assume Chloe reports under IFRS and has adopted IFRS $9.$ Should Chloe's ap$-$

proach to determining its Allowance for Expected Credit Losses consider "lifetime expected credit

losses"? What is meant by this concept? Would a percentage$-$of$-$sales approach be appropriate for

determining the Allowance for Expected Credit Losses under IFRS $9?$ Why or why not?

Answer & Explanation Solved by verified expert

See Answer