The allowance for doubtful accounts is a contra - assetaccount that represents the estimated uncollectiblereceivables. It is used to match bad debt expenses withrevenues in the same period, adhering to the matchingprinciple. For example, if a company estimates that 2%of its $100,000 receivables will be uncollectible, itrecords an allowance of $2,000. This approachprovides a more accurate representation of the netrealizable value of accounts receivable.

The allowance for doubtful accounts is indeed a contra-asset account used to estimate and account…

Answered: The allowance for doubtful accounts is…

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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Similar questions

Match the terms with the definitions.
idiyah Co. estimates that RO 6,500 of its accounts receivable to be uncollectible. If Allowance for Doubtful Accounts has a RO 200 debit balance, the company should record a elect one: O a. None of the answers are correct O b. debit to Bad Debt Expense for RO 5,300. O c credit to Allowance for Doubtful Accounts for RO 6,500. O d. debit to Allowance for Doubtful Accounts for RO 5,300. O e. credit to Bad Debt Expense for RO 7,700.
Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $16700. If the balance of the Allowance for Doubtful Accounts is $2070 credit before adjustment, what is the amount of bad debt expense for that period? $16700 $2070 $14630 $18770
Under the allowance method for uncollectible accounts, 1.the entry to write off an uncollectible account only involves statement of financial position accounts. 2.allowance for doubtful accounts increases, while accounts receivables decrease when writing off an uncollectible account. 3.bad debts expense is not recorded until a customer defaults. 4.bad debt expense increases, while allowance for doubtful accounts decreases when writing off an uncollectible account.
T5.
The __________ method is based on the relationship of credit sales and matches current bad debt expense against current credit sales. a.direct write-off b.percent of outstanding accounts receivable c.percentage of credit sales d.aging of accounts receivable
Assume Simple Company had credit sales of $243,000 and cost of goods sold of $143,000 for the period. Simple uses the percentage of credit sales method and estimates that 2 percent of credit sales would result in uncollectible accounts. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $180. Required: What amount of Bad Debt Expense would the company record as an end-of-period adjustment?
hi Can you assist me in undertanding better how you calculated the written off amount ? Why is the formula addind the opening and closing balance of the allowance for doubtful accounts and substract the allowance estimated ? You mentionned the bad debt was equal to total estimated allowance for doubtful accounts- balance in allowance for doubtful account . Is this the same formula to use for the write off ? Many thanks
a. The Stealem Co. uses the percentage of receivable method to estimate bad debts and maintains an allowance account to reduce accounts receivable to their net realizable value. An aging of accounts receivable produced the following analysis:Probable % of non-collectionNot yet due………………………………………………… $ 175,000 1%1-30 days past due………………………………………… 90,000 4%31-60 days past due……………………………………….. 40,000 10%61-90 days past due……………………………………….. 10,000 30%Over 90 days past due…………………………………….. 15,000 50%Total $330,000 Prior to adjustment the Allowance for Bad Debts account had a $6,300 credit balance. Instructions:1. Compute the estimated amount of receivables that will not be collected based on aging. 2. Prepare the adjusting journal entry need to record bad debt expense and bring theallowance account to the correct balance. 3. If Stealem used the percentage of sales method to estimate bad debts and it is assumedthe 2% of the sales would be uncollectible. Prepare the journal entry if sales…
If the Allowance for Doubtful Account has a Debit balance at the end of the period, then more 'actual bad debt' was recognized than 'estimated' O Net Income will be less than zero O estimated bad debt for the next period will not be necessary O AR balance will be zero 763C0
on 3 ts) Based on our discussions, why was the Allowance for Bad Debt created? O To record the amount of accounts receivable written off during the period. O To record the net amount of accounts receivable that will be paid. To record the amount of accounts receivable that will most likely never be paid. O To record the net sales amount from the last period that will probably never be paid.
An aging of a company's accounts receivable indicates an estimate of uncollectible accounts of $5,353. If Allowance for Doubtful Accounts has a $1,093 debit balance, the adjustment to journalize the bad debt expense for the period will require a a. debit to Bad Debt Expense for $6,446 b. debit to Bad Debt Expense for $5,353 c. credit to Allowance for Doubtful Accounts for $1,093 d. debit to Bad Debt Expense for $4,260

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