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Which of the following reasons should not be considered in order to explain why the receivables appear to be abnormally high?
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- Indicate whether each statement best describes the allowance method or the direct write-off method. List 1. Usually does not best match sales and expenses because Bad Debts Expense is not recorded until an account becomes uncollectible, which usually occurs in a period after the credit sale. 2. When an account is written off, the debit is to Bad Debts Expense. 3. Does not predict Bad Debts Expense. 4. Accounts receivable on the balance sheet is reported at net realizable value. 5. Estimates Bad Debts Expense related to the sales recorded in that period. 6. Matches the estimated loss from uncollectible accounts receivable against the sales they helped create. Method Allowance Direct write-offnot use ai pleaseChou Company uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $279,000; (2) up to 120 days past due, $52,000; and (3) more than 120 days past due, $22,000. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (1) 4.0 percent, (2) 10 percent, and (3) 32 percent, respectively. At December 31, the end of the current year, the Allowance for Doubtful Accounts balance is $300 (credit) before the end-of-period adjusting entry is made. Required: Prepare the appropriate bad debt expense adjusting entry for the current year. Show how the various accounts related to accounts receivable should be shown on the December 31, current year, balance sheet
- A method of estimating bad debts that focuses on the income statement rather than the balance sheet is the allowance method based on: a. direct write-offb. aging the trade receivable accountsc. credit salesd. the balance in the trade receivable accountsAn aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals $5,664. If Allowance for Doubtful Accounts has a $941 debit balance, the adjustment to record the bad debt expense for the period will require a Select the correct answer. debit to Bad Debt Expense for $941. debit to Bad Debt Expense for $6,605. credit to Allowance for Doubtful Accounts for $5,664. debit to Bad Debt Expense for $5,664.At the of fiscal year before the accounts are adjusted, accounts receivable has a balance of $200000 and allowance for doubtful accounts has a credit balance of $2500. if the estimate of uncollectible accounts determined by aging the receivable is $8500, the amount of bad debt expense is?
- The allowance for doubtful accounts is a contra - asset account that represents the estimated uncollectible receivables. It is used to match bad debt expenses with revenues in the same period, adhering to the matching principle. For example, if a company estimates that 2% of its $100,000 receivables will be uncollectible, it records an allowance of $2,000. This approach provides a more accurate representation of the net realizable value of accounts receivable.Which of the following is correct when bad debt expense is recorded at year-end? Group of answer choices A)Current assets will increase. B)Gross profit will decrease. C)Income from operations will not change. D)Current liabilities will decrease. E)None of the aboveAns
- Please list The potential accounting errors or operating problems that might have caused the unexpected fluctuations for each of the accounts below: 1. COGS-Change in COGS larger than change in sales. COGS increasing faster than sales. Still profitable but it could be a troubling sign if trend continues. May not stay profitable for long 2. WARRANT EXPENSE- why warranty expense can be increased? 3. Interest expense- Why is it important to confirm that if interest expense declined, debt must be also decreasing? 4. Income before taxes- declining 5. Income tax expense-declining 6. Net income-net income and gross profit decreased 7. Cash-drastic increased and then declined in another year 8. Accounts Receivable-Increased year to year 9. Prepaid expensed-Sudden decrease and then sudden shootPrepare the year-end adjusting entry for bad debts according to each of the following situations: Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is determined by an aging of accounts receivable.9
