Calculate Halloran Co. Accounts Receivable Before Allowances for 2024
What amount should Halloran report for accounts receivable, before allowances, at December 31, 2024?
a) $1,065,000
b) $1,210,000
c) $1,400,000
d) $945,000
Answer:
The accounts receivable for Halloran Co. before allowances at December 31, 2024, amounted to $1,295,000.
In 2024, Halloran Co. had an initial accounts receivable balance of $975,000. Throughout the year, they made credit sales totaling $4,500,000 and collected $4,100,000 from customers. Additionally, $80,000 of accounts receivable were written off during the year. The allowance for uncollectible accounts had a balance of $350,000 at the end of the year.
To calculate the accounts receivable before allowances at December 31, 2024, we use the formula:
Ending Account Receivable balance = Initial Account Receivable balance + Credit Sales - Collections from customers - Accounts Receivable written offBy plugging in the numbers:
Ending Account Receivable balance = $975,000 + $4,500,000 - $4,100,000 - $80,000 = $1,295,000Therefore, Halloran Co. should report an accounts receivable amount of $1,295,000 before allowances at December 31, 2024. Despite the challenges faced in collections and accounts written off, the company managed to maintain a solid accounts receivable balance, showing resilience and financial stability.
Understanding the accounts receivable balance is crucial for financial management and decision-making within a company. By analyzing these figures, businesses can assess their liquidity, credit policies, and overall financial health.