Chapter 9, Problem 3BPSB

To determine

Accounts Receivable:

Accounts receivable are the assets of the company as they depict the amount to be received in future from the customers to whom the products of the company have been sold. And thus, it can be described as the potential asset addition sources hence an asset for the company.

Bad Debts:

Bad debts can be described as that value of accounts receivable which are regarded by the companies as no more collectible or the potential customers who were liable to make such payments are not in situation to do so. Hence, bad debts are a loss and thus it ultimately decreases the assets of the company.

1.

To determine: The required balance of the allowance for doubtful accounts at December 31, 2017 using the aging of accounts receivable method.

To determine

To prepare: Adjusting entry to record bad debts expense at December 31, 2017.

To determine

Effect on net income in 2018.