Chapter 8, Problem 2PA

Interpreting Disclosure of Allowance for Doubtful Accounts

Expedia, Inc., disclosed the following rounded amounts (in thousands) concerning the Allowance for Doubtful Accounts on its Form 10-K annual report.

Required:

1. 1. Create a T-account for the Allowance for Doubtful Accounts and enter into it the 2014 amounts from the above schedule. Then write the T-account in equation format to prove the above items account for the changes in the account.
2. 2. Record summary journal entries for 2015 related to (a) estimating Bad Debt Expense and (b) writing off specific customer account balances.
3. 3. Supply the missing dollar amount noted by “?” for 2016.
4. 4. If Expedia had written off an additional $20 of Accounts Receivable during 2016, by how much would Net Receivables have decreased? How much would Net Income have decreased?