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interpreting disclosure of allowance for doubtful accounts sonic corp runs the large 727253

Interpreting Disclosure of Allowance for Doubtful Accounts

Sonic Corp. runs the largest chain of drive in restaurants in the United States. It has an Allowance for Doubtful Accounts that relates to its accounts and notes receivable. In its 2008 10 K, Sonic reported the following changes in the Allowance for Doubtful Accounts (in thousands):

Balance at

Charged to

Amounts

Balance at

Beginning of Period

Bad Debt Expense

Written Off

End of Period

$711

$341

$335

$717

Required:

1. Create a T account for the Allowance for Doubtful Accounts and enter into it the amounts from the above schedule. Then write the T account in equation format to prove that the above items account for the changes in the account.

2. Record summary journal entries related to ( a ) estimating bad debt expense, and ( b ) write offs of specific balances during the year.

3. If Sonic had written off an additional $20,000 of accounts receivable during the period, how would Net Receivables have been affected? How would Net Income have been affected? Explain why.

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