Under the allowance method bad debt expense is recorded
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The account Allowance for Doubtful Accounts is classified as a(n) Show a)expense. b)contra account to Accounts Receivable. C)liability. d)contra account of Bad Debt Expense b Under the allowance method, Bad Debt Expense is recorded a when the loss amount is known. b for an amount that the company estimates it will not collect. c several times during the accounting period. d when an individual account is written off. b The expense recognition principle relates to credit losses by stating that bad debt expense should be recorded a in the period of the loss. b in the same period as allowed for tax purposes. c for an exact amount. d in the period of the sale. d Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited Entry field with correct answer a at the end of each accounting period. b whenever a pre-determined amount of credit sales have been made. c when an account is determined to be uncollectible. d when a credit sale is past due. c Two methods of accounting for uncollectible accounts are the Entry field with correct answer a direct write-off method and the allowance method. b allowance method and the net realizable method. c allowance method and the accrual method. d direct write-off method and the accrual method. a You have just received notice that a customer of yours with an account receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to Entry field with correct answer a debit Bad Debt Expense and credit Allowance for Doubtful Accounts. b debit Allowance for Doubtful Accounts and credit Accounts Receivable. c debit Allowance for Doubtful Accounts and credit Bad Debt Expense. d debit Bad Debt Expense and credit Accounts Receivable. b Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $250000 and credit sales are $1000000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2500 before adjustment? Entry field with correct answer a Bad Debt Expense 7500 7500 b Bad Debt Expense 10000 10000 c Bad Debt Expense 10000 10000 d) Bad Debt Expense 7500 7500 d Net credit sales for the month are $800,000. The accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables
balance using the percentage-of-receivables basis. If Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment, what is the balance after adjustment? a (LO 3) c . d Cuso Company purchased equipment on January 1, 2016, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated
depreciation at December 31, 2017, if the straight-line method of depreciation is used? d (LO 2) c (LO 4) c (LO 2) c (LO 4) a When using the allowance method as bad debt expense is recorded?To use the allowance method, record bad debts as a contra asset account (an account that has a zero or negative balance) on your balance sheet. In this case, you would debit the bad debt expense and credit your allowance for bad debts.
How are bad debts accounted for under the allowance method?The allowance method involves setting aside a reserve for bad debts that are expected in the future. The reserve is based on a percentage of the sales generated in a reporting period, possibly adjusted for the risk associated with certain customers.
Where do you record bad debt expense?Bad debt expenses are generally classified as a sales and general administrative expense and are found on the income statement.
How is the allowance method recorded?The allowance method matches the estimated expenses or losses from uncollectible accounts receivables against the sales. We record our accounts receivable on the balance sheet. This amount is often inaccurate, as we will likely not be able to collect all of these.
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