Accounts receivable Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business. Bad debt expense: Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense. Percentage-of-receivables basis: It is a method of estimating the bad debts (loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of receivables for a specific period. Allowance method: It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account. Direct write-off method: This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts, by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible. To determine: The amount would be reported as bad debt expense, if Company M uses the direct write-off method of accounting for bad debts.

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Answer 1

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.4AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Percentage-of-receivables basis:

It is a method of estimating the bad debts (loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of receivables for a specific period.

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts, by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To determine: The amount would be reported as bad debt expense, if Company M uses the direct write-off method of accounting for bad debts.

(b)

To determine

The amount of bad debts expense would be recorded by Company M.

(c)

To determine

The amount of bad debts expense would be recorded by Company M.

(d)

To determine

To describe: The weakness of reporting bad debt expense under direct write-off method.

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As of December 31, 2021, ABC Company had an allowance account for bad debts with a debit balance of $200. Credit sales during 2021 were $60,000. An aging analysis of accounts receivable indicated that $2,300 would be uncollectible. What was the amount of bad debt expense and bad debt provision balance that the company reported for 2021 using the statement of financial position (% of accounts receivable) approach? Select one: a. Expense = $2,500 and Provision ...= $2,300 credit. b. Expense = $2,100 and Provision ...= $2,700 credit. C. Expense = $2,400 and Provision ..= $2,500 credit. d. Expense = $2,300 and Provision ...= $2,700 debit.

I NEED HELP FEELING IN THE BLANKS Information related to Novak Company for 2020 is summarized below. Total credit sales $2,575,000 Accounts receivable at December 31 853,000 Bad debts written off 34,900 (a)What amount of bad debt expense will Novak Company report if it uses the direct write-off method of accounting for bad debts? $________________ (b)Assume that Novak Company estimates its bad debt expense based on 5% of accounts receivable. What amount of bad debt expense will Novak record if it has an Allowance for Doubtful Accounts credit balance of $3,700? $___________________ (c)Assume that Novak Company estimates its bad debt expense based on 5% of accounts receivable. What amount of bad debt expense will Novak record if it has an Allowance for Doubtful Accounts debit balance of $3,700? $__________________

Answer 2

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.4AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Percentage-of-receivables basis:

It is a method of estimating the bad debts (loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of receivables for a specific period.

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts, by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To determine: The amount would be reported as bad debt expense, if Company M uses the direct write-off method of accounting for bad debts.

(b)

To determine

The amount of bad debts expense would be recorded by Company M.

(c)

To determine

The amount of bad debts expense would be recorded by Company M.

(d)

To determine

To describe: The weakness of reporting bad debt expense under direct write-off method.

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.4AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Percentage-of-receivables basis:

It is a method of estimating the bad debts (loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of receivables for a specific period.

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts, by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To determine: The amount would be reported as bad debt expense, if Company M uses the direct write-off method of accounting for bad debts.

(b)

To determine

The amount of bad debts expense would be recorded by Company M.

(c)

To determine

The amount of bad debts expense would be recorded by Company M.

(d)

To determine

To describe: The weakness of reporting bad debt expense under direct write-off method.

Expert Solution & Answer

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.4AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Percentage-of-receivables basis:

It is a method of estimating the bad debts (loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of receivables for a specific period.

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts, by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To determine: The amount would be reported as bad debt expense, if Company M uses the direct write-off method of accounting for bad debts.

(b)

To determine

The amount of bad debts expense would be recorded by Company M.

(c)

To determine

The amount of bad debts expense would be recorded by Company M.

(d)

To determine

To describe: The weakness of reporting bad debt expense under direct write-off method.

Expert Solution & Answer

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Answer 5

Chapter 8, Problem 8.4AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Percentage-of-receivables basis:

It is a method of estimating the bad debts (loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of receivables for a specific period.

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts, by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To determine: The amount would be reported as bad debt expense, if Company M uses the direct write-off method of accounting for bad debts.

(b)

To determine

The amount of bad debts expense would be recorded by Company M.

(c)

To determine

The amount of bad debts expense would be recorded by Company M.

(d)

To determine

To describe: The weakness of reporting bad debt expense under direct write-off method.

Answer 6

Chapter 8, Problem 8.4AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Percentage-of-receivables basis:

It is a method of estimating the bad debts (loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of receivables for a specific period.

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts, by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To determine: The amount would be reported as bad debt expense, if Company M uses the direct write-off method of accounting for bad debts.

Answer 7

Chapter 8, Problem 8.4AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Percentage-of-receivables basis:

It is a method of estimating the bad debts (loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of receivables for a specific period.

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts, by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To determine: The amount would be reported as bad debt expense, if Company M uses the direct write-off method of accounting for bad debts.

Answer 8

(b)

To determine

The amount of bad debts expense would be recorded by Company M.

Answer 9

(b)

To determine

The amount of bad debts expense would be recorded by Company M.

Answer 10

(c)

To determine

The amount of bad debts expense would be recorded by Company M.

Answer 11

(c)

To determine

The amount of bad debts expense would be recorded by Company M.

Answer 12

(d)

To determine

To describe: The weakness of reporting bad debt expense under direct write-off method.

Answer 13

(d)

To determine

To describe: The weakness of reporting bad debt expense under direct write-off method.

Answer 14

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Answer 15

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Answer 17

Ch. 8 - What is the difference between an account...Ch. 8 - What are some common types of receivables other...Ch. 8 - What are the essential features of the allowance...Ch. 8 - Prob. 4Q Ch. 8 - Prob. 5Q Ch. 8 - Prob. 6Q Ch. 8 - Prob. 7Q Ch. 8 - Tawnya Dobbs, the vice president of sales for...Ch. 8 - Prob. 9Q Ch. 8 - Prob. 10Q

Solution Summary: The author explains that the amount of 37,000 would be reported as bad debt expense by Company M, if it uses the direct write-off method of accounting.

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The amount of bad debts expense would be recorded by Company M.

The amount of bad debts expense would be recorded by Company M.

To describe: The weakness of reporting bad debt expense under direct write-off method.

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