Blue Shoes Ltd has gone bankrupt and will not pay S10 000 to XYZ. XYZ has accounts receivable of $12 million and an allowance for doubtful debts of $500 000. XYZ does not adjust its accounts for the $10 000 that will not be paid by Blue Shoes Ltd. Which of the following remarks is true about the financial statements? O A. There is no effect on total liabilities, assets or net profit. O B. There is an overstatement of total assets and net profit. There is an understatement of total assets and net profit. O D. There is an understatement of net profit. O O

Blue Shoes Ltd has gone bankrupt and will not pay S10 000 to XYZ. XYZ has accounts receivable of $12 million and an allowance for doubtful debts of $500 000. XYZ does not adjust its accounts for the $10 000 that will not be paid by Blue Shoes Ltd. Which of the following remarks is true about the financial statements? O A. There is no effect on total liabilities, assets or net profit. O B. There is an overstatement of total assets and net profit. There is an understatement of total assets and net profit. O D. There is an understatement of net profit. O O

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

An aging of a company's accounts receivable indicates that $9700 is estimated to be uncollectible. If Allowance for Doubtful Accounts has a $3010 balance, the adjustment to record bad debts for the period will require a(n)
Assume that Toni Braxton Company has recently fallen into financial difficulties. By reviewing all available evidence on December 31, 2017. one of Toni Braxton's creditors, the National American Bank, determined that Tonì Braxton would pay back only 65% of the principal at maturity. As a result, the bank decided that the loan was impaired. if the loan is estimated to be $225,000 what entry should National American Bank make to record this loss? Bad Debt Expense 225,000 Allowance for Doubtful Accounts 225,000 Bad Debt Expense 146,250 Allowance for Doubtful Accounts 146,250
Question no. 02 (b) (07)Wilson Corporation uses an income statement approach to estimate credit losses. Its Accounts Receivable of $5,000,000 at the beginning of the period had a net realizable value of $4,225,000.During year 2019 company wrote off all of its uncollectible accounts. Of these accounts 35% were subsequently collected. Prepare the entries to record write off using allowance for doubtful account and direct write off approaches. Draft Entry to record the accounts receivable that were subsequently collected. Allowance for doubtful account is treated as an expense or as a liability in general journal. Give reasons for your answer. Moreover explain the treatment of these in balance sheet. What is the characteristic common to all current assets? Many retail stores regularly sell merchandise on installment plans, calling for payments over a period of 24 or 36 months. Do such receivables qualify as current assets? Explain.
Marshall Companies, Inc., holds a note receivable from a former subsidiary. Due to financial difficulties, the former subsidiary has been unable to pay the previous year’s interest on the note. Marshall agreed to restructure the debt by both delaying and reducing remaining cash payments. The concessions result in a credit loss on the creditor’s investment in the receivable. How is the credit loss on the troubled debt restructuring calculated?
The financial statements of Calico Corporation, for the May 31 year-end, included the following information relating to their allowance for doubtful accounts: Balance in allowance at the beginning of the year $278 million, accounts written off during the year of $116 million, balance in allowance at the end of the year $271 million. What did Calico Corporation report as bad debt expense for the year? Select one: a. $155 million b. $109 million c. None of the above d. $162 million e. $123 million
Wraith Inc. factored without recourse its accounts receivable amounting to P100,000. Wraith received P82,000 as cash advance from the bank and the bank withheld 3,000 as contingency for uncollectible accounts. The bank charged Wraith P15,000 as finance service fee for factoring. How much is the loss on factoring from the transaction? a. Zero b. 10,000 c. 15,000 d. 20,000
0 (Based on Appendix 7B) Marshall Companies, Inc., holds a note receivable from a former subsidiary. Dueto financial difficulties, the former subsidiary has been unable to pay the previous year’s interest on the note.Marshall agreed to restructure the debt by both delaying and reducing remaining cash payments. The concessionsimpair the creditor’s investment in the receivable. How is this impairment recorded?
3. A corporation uses the allowance method of recording bad debts. On June 7, 20x3, the corporation learns that the bankruptcy court has ruled that Carla Cox is bankrupt and now no longer owes $1,000 to the corporation. To write off Carla Cox's account receivable, the corporation should... Debit Bad Debts Expense for $1,000 Debit Accounts Receivable for $1,000 A. В. С. Credit Allowance for Bad Debts for $1,000 D. Debit Allowance for Bad Debts for $1,000 Е. None of the above
How to do? 2
(Bad-Debt Accounting) Simms Company has significant amounts of trade accounts receivable. Simms uses the allowance method to estimate bad debts instead of the direct write-off method. During the year, some specific accounts were written off as uncollectible, and some that were previously written off as uncollectible were collected.Instructions(a) What are the deficiencies of the direct write-off method?(b) Briefly describe the allowance method to estimate bad debts and the theoretical justification for its use?(c) How should Simms account for the collection of the specific accounts previously written off as uncollectible?