1. From page 5-4 of the VLN, when using the percent of receivables method, the math of multiplying accounts receivable by the percent of uncollectible accounts directly calculates:Group of answer choicesA. The ending balance of the allowance for uncollectible accounts.B. Bad debt expenseC. Net accounts receivableD. The amount to use in the adjusting entry to recognize bad debt expense2. From page 5-4 of the VLN, what is the appropriate amount to record for bad debt expense when the company records the adjusting entry on 12/31? 3. Using the data from page 5-4 of the VLN, assume that instead of having a $500 credit balance in the Allowance for Uncollectible Accounts (AUA), the company had a $600 credit balance in the account. How would that affect the ending balance in the AUA after the company prepared the adjusting entry and posted it to the AUA?Group of answer choicesA. The higher balance before the adjusting entry would cause the ending balance in the AUA to increase.B. The higher balance before the adjusting entry does not impact the ending balance in the AUA after the adjusting entry.C. The higher balance before the adjusting entry would cause the ending balance in the AUA to decrease.D. There is no adjusting entry to record if there is a balance in the AUA at the end of the period. record the adjusting entry to get the ending balance in the Allowance for uncollectible accounts(AUA) to be equal to the amount computed (% of A/R). Example: The ending balance in theAUA needs to be $2,500. Before the adjusting entry the balance is $200 credit. To get thebalance to be $2,500, an adjusting entry for $2,300 is needed.Practice At the end of the year, D Company's balance in the allowance for uncollectibleaccounts (AUA) was $500 (credit) before adjusting entries. The balance in Accounts Receilvableis $30,000. The company estimates that 15% of the accounts will not be collectible. Preparethe adjusting entry for uncollectible accounts using the precent of receivables method.A/RAllowance for uncollectible accounts30,00050012/31Bad Debt ExpenseAllowance for uncollectible accounts500What should D report as bad debt expense on their 12/31 Income Statement?D would report net accounts receivable on their 12/31 Balance Sheet at:A/RAllowance for uncollectible accounts30,000Page 5-4ChapterS田 Estimating Uncollectible AccountsAn estimate of bad debts is made at the end of the accounting period to match the cost ofcredit sales (bad debt expense) with the revenue credit sales allowed the company to recordduring the period. The estimate is incorporated in the company's books through an ADJUSTINGENTRY and the entry increases the allowance for uncollectible accounts and bad debt expense.Percent of Receivables Method (an allowance method)management estimates a percent of ending accounts receivable they expect to be uncollectiblethe ending balance of the Allowance for Uncollectible Accounts (AUA) is determined based onthe estimate (% of uncollectible accounts x ending balance of A/R, "% of A/R"). Example:Management estimates 5% of their $50,000 of remaining accounts receivables (ending balance)to be uncollectible. Therefore, the ending balance in the AUA needs to be $2,500 (5% x$50,000).record the adjusting entry to get the ending balance in the Allowance for uncollectible accounts(AUA) to be equal to the amount computed (% of A/R). Example: The ending balance in theAUA needs to be $2,500. Before the adjusting entry the balance is $200 credit. To get thebalance to be $2,500, an adjusting entry for $2,300 is needed.Practice At the end of the year, D Company's balance in the allowance for uncollectibleaccounts (AUA) was $500 (credit) before adjusting entries. The balance in Accounts Receivableis $30,000. The company estimates that 15% of the accounts will not be collectible. Preparethe adjusting entry for uncollectible accounts using the precent of receivables method.A/RAllowance for uncollectible accounts30,00050012/31Bad Debt ExpenseAllowance for uncollectible accounts500

When a company uses the Allowance method to record bad debt expenses, it maintains an allowance for…

Answered: From page 5-4 of the VLN, when using…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. From page 5-4 of the VLN, when using the percent of receivables method, the math of multiplying accounts receivable by the percent of uncollectible accounts directly calculates: Group of answer choices A. The ending balance of the allowance for uncollectible accounts. B. Bad debt expense C. Net accounts receivable D. The amount to use in the adjusting entry to recognize bad debt expense 2. From page 5-4 of the VLN, what is the appropriate amount to record for bad debt expense when the company records the adjusting entry on 12/31? 3. Using the data from page 5-4 of the VLN, assume that instead of having a $500 credit balance in the Allowance for Uncollectible Accounts (AUA), the company had a $600 credit balance in the account. How would that affect the ending balance in the AUA after the company prepared the adjusting entry and posted it to the AUA? Group of answer choices A. The higher balance before the adjusting entry would cause the ending balance in the AUA to increase. B. The higher balance before the adjusting entry does not impact the ending balance in the AUA after the adjusting entry. C. The higher balance before the adjusting entry would cause the ending balance in the AUA to decrease. D. There is no adjusting entry to record if there is a balance in the AUA at the end of the period.

record the adjusting entry to get the ending balance in the Allowance for uncollectible accounts
(AUA) to be equal to the amount computed (% of A/R). Example: The ending balance in the
AUA needs to be $2,500. Before the adjusting entry the balance is $200 credit. To get the
balance to be $2,500, an adjusting entry for $2,300 is needed.
Practice At the end of the year, D Company's balance in the allowance for uncollectible
accounts (AUA) was $500 (credit) before adjusting entries. The balance in Accounts Receilvable
is $30,000. The company estimates that 15% of the accounts will not be collectible. Prepare
the adjusting entry for uncollectible accounts using the precent of receivables method.
A/R
Allowance for uncollectible accounts
30,000
500
12/31
Bad Debt Expense
Allowance for uncollectible accounts
500
What should D report as bad debt expense on their 12/31 Income Statement?
D would report net accounts receivable on their 12/31 Balance Sheet at:
A/R
Allowance for uncollectible accounts
30,000
Page 5-4
ChapterS
田

Estimating Uncollectible Accounts
An estimate of bad debts is made at the end of the accounting period to match the cost of
credit sales (bad debt expense) with the revenue credit sales allowed the company to record
during the period. The estimate is incorporated in the company's books through an ADJUSTING
ENTRY and the entry increases the allowance for uncollectible accounts and bad debt expense.
Percent of Receivables Method (an allowance method)
management estimates a percent of ending accounts receivable they expect to be uncollectible
the ending balance of the Allowance for Uncollectible Accounts (AUA) is determined based on
the estimate (% of uncollectible accounts x ending balance of A/R, "% of A/R"). Example:
Management estimates 5% of their $50,000 of remaining accounts receivables (ending balance)
to be uncollectible. Therefore, the ending balance in the AUA needs to be $2,500 (5% x
$50,000).
record the adjusting entry to get the ending balance in the Allowance for uncollectible accounts
(AUA) to be equal to the amount computed (% of A/R). Example: The ending balance in the
AUA needs to be $2,500. Before the adjusting entry the balance is $200 credit. To get the
balance to be $2,500, an adjusting entry for $2,300 is needed.
Practice At the end of the year, D Company's balance in the allowance for uncollectible
accounts (AUA) was $500 (credit) before adjusting entries. The balance in Accounts Receivable
is $30,000. The company estimates that 15% of the accounts will not be collectible. Prepare
the adjusting entry for uncollectible accounts using the precent of receivables method.
A/R
Allowance for uncollectible accounts
30,000
500
12/31
Bad Debt Expense
Allowance for uncollectible accounts
500

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