Peter Enterprises uses the Allowance Method for accounting for Bad Debts. Peter also uses the percentage of credit sales method for prediction. At the end of the year 2020, Peter Enterprises estimates that Doubtful Debts are 5% of the total credit sales $10,100,000 (2020 Year). The correct entry to record the prediction of the Bad Debts Expense on 31st December 2020, is: Select one: O a. Debit Allowance for Doubtful Debts $505,000 Credit Bad Debt Expense $505,000 O b. Debit Bad Debt Expense $505,000 Credit Accounts Receivable $505,000 Debit Accounts Receivable $505,000 Credit Allowance for Doubtful Debts $505,000 d. Debit Bad Debt Expense $505,000 Credit Allowance for Doubtful Debts $505,000

Peter Enterprises uses the Allowance Method for accounting for Bad Debts. Peter also uses the percentage of credit sales method for prediction. At the end of the year 2020, Peter Enterprises estimates that Doubtful Debts are 5% of the total credit sales $10,100,000 (2020 Year). The correct entry to record the prediction of the Bad Debts Expense on 31st December 2020, is: Select one: O a. Debit Allowance for Doubtful Debts $505,000 Credit Bad Debt Expense $505,000 O b. Debit Bad Debt Expense $505,000 Credit Accounts Receivable $505,000 Debit Accounts Receivable $505,000 Credit Allowance for Doubtful Debts $505,000 d. Debit Bad Debt Expense $505,000 Credit Allowance for Doubtful Debts $505,000

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Description: Peter Enterprises uses the Allowance Method for accounting for Bad Debts.Peter also uses the percentage of credit sales method for prediction.At the end of the year 2020, Peter Enterprises estimates that Doubtful Debts are 5% of the total creditsale

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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Concept explainers

Bad Debts

At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.

Accounts Receivable

The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.

Question

Practice Pack

OFFON

Peter Enterprises uses the Allowance Method for accounting for Bad Debts.
Peter also uses the percentage of credit sales method for prediction.
At the end of the year 2020, Peter Enterprises estimates that Doubtful Debts are 5% of the total credit
sales $10,100,000 (2020 Year).
The correct entry to record the prediction of the Bad Debts Expense on 31st December 2020, is:
Select one:
O a.
Debit Allowance for Doubtful Debts $505,000
Credit Bad Debt Expense $505,000
O b.
Debit Bad Debt Expense $505,000
Credit Accounts Receivable $505,000
O C.
Debit
Accounts Receivable $505,000
Credit Allowance for Doubtful Debts $505,000
O d.
Debit
Bad Debt Expense $505,000
Credit Allowance for Doubtful Debts $505,000

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