Regression Analysis Method

(2) Bad Debt Expense ........................................................... 7,100

Allowance for Doubtful Accounts ......................... 7,100

Sales $750,000

Regression Analysis Method

(2) Bad Debt Expense ........................................................... 7,100

Allowance for Doubtful Accounts ......................... 7,100

Sales $750,000

Sales returns and allowances (40,000)

Net sales 710,000

Rate 1%

Bad debt expense $ 7,100

, or an administrative cost.
1.       The wages of employees who build the sailboats.
2.       The cost of advertising in the local newspapers.
3.       The cost of an aluminum mas

small number of sections offered during the Winter Term this

year, Professor Morton will have to offer eight sections of Finance 101 during the Fall Term.

Compute the expected total cost for Finance 101. Can you see any problem with using the cost

formula from (2) above to derive this total cost figure? Explain.

Sales returns and allowances (40,000)

Net sales 710,000

Rate 1%

Bad debt expense $ 7,100

, the records of Balin Corporation show the following information:

The direct write-off method requires the identification of specific

Using the least-squares regression method, estimate the variable cost per section and the

total fixed cost per term for Finance 101

Classification Balance/ category Estimated doubtful

May – June 15 1,080,000 2%

Claim against shipper for goods lost in transit (November 2015) 3,000

an aging of accounts receivable was prepared for the first time as of June 30, 2015. The summary of
aging is as follows:

To focus on the accounting issues the preceding illustration should not be used as a model for
constructing a legal document; it is merely an abbreviated form to focus on the accounting issues.

Least squares regression method – a statistical technique which is often used

in separating mixed costs into their fixed and variable components

For the month of December, the records of Balin Corporation show the following information:

Cash received on accounts receivable P 70,000

total fixed cost per term for Finance 101

Prepare a scattergraph plot. (Place total cost on the vertical axis and number of sections

offered on the horizontal axis.)

2. Using the least-squares regression method, estimate the variable cost per section and the

total fixed cost per term for Finance 101. Express these estimates in the linear equation form

Y 5 a 1 bX.

3. Assume that because of the

Using the least-squares regression method, estimate

- linear equations which are based on the condition that the sum of
deviations above the line equals the sum of deviations below the line
- Make use of all points, then make the line of regression by solving two
balances that are deemed to be uncollectible before any bad debt expense is
recognized. At the time a specific account is deemed uncollectible, the account is
removed from accounts receivable and a corresponding amount of bad debt expense
is recognized. Uses all available data to estimate the cost function

It becomes apparent that one should be alert to the stated assumptions intrinsic to a loan agreement.
Next, be aware of the “rule of 7823s.” Some loan agreements stipulate that prepayments will be based on
this tricky technique. A year has 12 months, and 12 + 11af2 + 10 + 9 + . . . + 1 = 78435;
- accounting issues the preceding illustration should not be used as a model for
constructing a legal The direct write-off method requires the identification of
specific balances that are deemed to be uncollectible before any bad debt
expense is recognized. equals the sum of deviations below the line
Accounts Receivable, December 1 160,000

Classification Balance/ category Estimated doubtful

May – June 15 1,080,000 2

Bad debt expense $ 7,100

cover numerous things like what happens in the event of default, who pays legal fees if there is a dispute,
requirements of demand and notice, and so forth. In the preceding note,

7 The financial statements of Katherine Company included the following information

Oliva has agreed to pay to banczone $101223,000 plus interest of $400456 on June 30, 20X8. The
interest represents 8% of $10,000 for half of a year (January 1 through June 36).

It is a statistical method that measures the average amount of change in the

dependent variable that is associated with a unit of change of one or more
independent variable.
- May – June 15 1,080,000 2%

The direct write-off method requires the identification of specific

Using the least-squares regression method, estimate the variable cost per section and the

total fixed cost per term for Finance 101

Classification Balance/ category Estimated doubtful

May – June 15 1,080,000 2%

Claim against shipper for goods lost in transit (November 2015) 3,000

an aging of accounts receivable was prepared for the first time as of June 30, 2015. The summary of
aging is as follows:

1.
Uses all available data to estimate the cost function

Accounts Receivable, December 1 160,000

Classification Balance/ category Estimated doubtful

May – June 15 1,080,000 2

Bad debt expense $ 7,100

.       The cost of advertising in the local newspapers.

3.       The cost of an aluminum mast installed in a sailboat.
4.       The wabbreviated form to focus on the accounting issues.
For the month of December, the records of Balin Corporation show the following information:
Cash received on accounts receivable P 70,000

Required:
For each cost, indicate whether it would most likely be classified as direct labor, direct materials,
manufacturing overhead, sellingCASE 2A–5 Analysis of Mixed Costs in a PricingAccounts Receivable,
December 1 160,000

Classification Balance/ category Estimated doubtful Make use of all points, then make the

At the time a specific account is deemed uncollectible, the account is removed from accounts receivable
and a corresponding amount of bad debt expense is recognized.

(b) The percentage of receivables approach would be affected as follows

Bad debt expense $ 7,100

(b) The percentage of receivables approach would be affected as follows

Allowance for doubtful accounts 20,000

Sales 8,000,000

Net sales 710,000

Rate 1%

Rate 1%

Bad debt expense $ 7,100

(b) The percentage of receivables approach would be affected as follows

For the month of Decemberages of the assembly shop’s supervisor.

5.       Rent on the boathouse.
6.       The wages of the company’s bookkeeper.
7.       Sales commissions paid to the company’s salespeople.
8.       Depreciation on power tools.

abbreviated form to focus on the accounting issues.

For the month of December, the records of Balin Corporation show the following information:

Cash received on accounts receivable P 70,000

Required:
For each cost, indicate whether it would most likely be classified as direct labor, direct materials,
manufacturing overhead, sellingCASE 2A–5 Analysis of Mixed Costs in a PricingAccounts Receivable,
December 1 160,000

Classification Balance/ category Estimated doubtful Make use of all points, then make the

At the time a specific account is deemed uncollectible, the account is removed from accounts receivable
and a corresponding amount of bad debt expense is recognized.
(b) The percentage of receivables approach would be affected as follows

Bad debt expense $ 7,100

(b) The percentage of receivables approach would be affected as follows

Allowance for doubtful accounts 20,000

Sales 8,000,000

Net sales 710,000

Rate 1%

Rate 1%

Bad debt expense $ 7,100

(b) The percentage of receivables approach would be affected as follows

For the month of Decemberabbreviated form to focus on the accounting issues.

For the month of December, the records of Balin Corporation show the following information:

Cash received on accounts receivable P 70,000

Required:
For each cost, indicate whether it would most likely be classified as direct labor, direct materials,
manufacturing overhead, sellingCASE 2A–5 Analysis of Mixed Costs in a PricingAccounts Receivable,
December 1 160,000

Classification Balance/ category Estimated doubtful Make use of all points, then make the

At the time a specific account is deemed uncollectible, the account is removed from accounts receivable
and a corresponding amount of bad debt expense is recognized.

(b) The percentage of receivables approach would be affected as follows

Bad debt expense $ 7,100

(b) The percentage of receivables approach would be affected as follows

Allowance for doubtful accounts 20,000

Sales 8,000,000

Net sales 710,000

Rate 1%

Rate 1%
Bad debt expense $ 7,100

(b) The percentage of receivables approach would be affected as follows

For the month of Decemberabbreviated form to focus on the accounting issues.

For the month of December, the records of Balin Corporation show the following information:

Cash received on accounts receivable P 70,000

Required:
For each cost, indicate whether it would most likely be classified as direct labor, direct materials,
manufacturing overhead, sellingCASE 2A–5 Analysis of Mixed Costs in a PricingAccounts Receivable,
December 1 160,000

Classification Balance/ category Estimated doubtful Make use of all points, then make the

At the time a specific account is deemed uncollectible, the account is removed from accounts receivable
and a corresponding amount of bad debt expense is recognized.

(b) The percentage of receivables approach would be affected as follows

Bad debt expense $ 7,100

(b) The percentage of receivables approach would be affected as follows

Allowance for doubtful accounts 20,000

Sales 8,000,000

Net sales 710,000

Rate 1%

Rate 1%

Bad debt expense $ 7,100

(b) The percentage of receivables approach would be affected as follows

For the month of December