Fundamental Accounting Principles -Hardcover
22nd Edition
ISBN: 9780077632991
Author: Wild
Publisher: MCG
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Chapter 9, Problem 4QS
Distinguishing between allowance method and direct write-off method
P1 P2
The following list describes aspects of either the allowance method or the direct write-off method to account for
1. No attempt is made to predict bad debts expense.
2.
3. The write-off of a specific account does not affect net income.
4. When an account is written off, the debit is to Bad Debts Expense.
5. Sales and any bad debt expense are usually not recorded in the same period; thus, proper matching (of revenue and expense recognition) does not consistently occur.
6. Requires a company to estimate bad debts expense related to the sales recorded in that period.
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Students have asked these similar questions
Using the following key, identify the effects of the following transactions or conditions on the various financial statement elements: I = increases; D = decreases; NE = no effect.
A.credit sale
b. Collection of a portion of accounts receivable
c. Estimate of bad debts
d. Write-off of a specific uncollectible account
A
B
UD
C
|7. If bad debts expense is determined by estimating uncollectible accounts receivable,
the entry to record the write-off of a specific uncollectible account would decrease:
allowance for uncollectible accounts.
net income.
net book value of accounts receivable.
bad debts expense.
8. If management intentionally underestimates bad debts expense, then net income is
A overstated and assets are understated.
B understated and assets are overstated
C
understated and assets are understated.
D overstated and assets are overstated
9. Which of these items will not appear in the retained earnings statement?
A
Net Loss
B
Prior period adjustment, net of taxes
с Cumulative effect on prior years of a change in accounting principles, net of tax
D
Dividends.
E
All of the above appear in the statement of retained earnings
Southwest Pedlatrics has the following balances on December 31, 2021, before any adjustment: Accounts Recelvable = $124,000; Allowance for Uncollectible Accounts = $2,100
(debit). On December 31, 2021, Southwest estimates uncollectible accounts to be 20% of accounts recelvable.
Required:
1. Record the adjusting entry for uncollectible accounts on December 31, 2021. (If no entry Is required for a particular transactlon/event, select "No Journal Entry Requlred" In
the first account fleld.)
View transaction list
Journal entry worksheet
1
>
Record the adjusting entry for Uncollectible Accounts.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
December 31,
2021
Record entry
Clear entry
View general journal
Chapter 9 Solutions
Fundamental Accounting Principles -Hardcover
Ch. 9 - Prob. 1DQCh. 9 - Why does the direct write-off method of accounting...Ch. 9 - Prob. 3DQCh. 9 - Why might a business prefer a note receivable to...Ch. 9 - Prob. 5DQCh. 9 - Prob. 6DQCh. 9 - Prob. 7DQCh. 9 - Prob. 8DQCh. 9 - Prob. 9DQCh. 9 - Prob. 10DQ
Ch. 9 - Prob. 1QSCh. 9 - Prob. 2QSCh. 9 - Prob. 3QSCh. 9 - Distinguishing between allowance method and direct...Ch. 9 - Prob. 5QSCh. 9 - Prob. 6QSCh. 9 - Prob. 7QSCh. 9 - Prob. 8QSCh. 9 - Prob. 9QSCh. 9 - Prob. 10QSCh. 9 - Prob. 11QSCh. 9 - Prob. 12QSCh. 9 - Prob. 13QSCh. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - Prob. 3ECh. 9 - Prob. 4ECh. 9 - Prob. 5ECh. 9 - Prob. 6ECh. 9 - Prob. 7ECh. 9 - Prob. 8ECh. 9 - Prob. 9ECh. 9 - Prob. 10ECh. 9 - Prob. 11ECh. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Prob. 14ECh. 9 - Prob. 15ECh. 9 - Prob. 16ECh. 9 - Prob. 1APSACh. 9 - Prob. 2APSACh. 9 - Prob. 3APSACh. 9 - Prob. 4APSACh. 9 - Prob. 5APSACh. 9 - Prob. 1BPSBCh. 9 - Prob. 2BPSBCh. 9 - Prob. 3BPSBCh. 9 - Prob. 4BPSBCh. 9 - Prob. 5BPSBCh. 9 - Prob. 9SPCh. 9 - Prob. 1GLPCh. 9 - Prob. 1BTNCh. 9 - Prob. 2BTNCh. 9 - Prob. 3BTNCh. 9 - Prob. 4BTNCh. 9 - Access eBay’s, January 31, 2014, filing of its...Ch. 9 - Prob. 6BTNCh. 9 - Prob. 7BTNCh. 9 - Prob. 8BTNCh. 9 - Prob. 9BTN
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Which method delays recognition of bad debt until the specific customer accounts receivable is identified? A. income statement method B. balance sheet method C. direct write-off method D. allowance methodarrow_forwardIndicate whether each statement best describes the allowance (A) method or the direct write-off (DW)method. Does not predict bad debts expense.arrow_forwardQ4 - Which of the following is a method of accounting for Bad Debts? Percentage of Sales Method а. b. Discounted Method Percentage of Account Receivable Method C. d. Allowance Methodarrow_forward
- Indicate whether each statement best describes the allowance method or the direct write-off method. List 1. Does not predict bad debts expense. 2. Accounts receivable on the balance sheet is reported at net realizable value. 3. The write-off of a specific account does not affect net income. 4. When an account is written off, the debit is to Bad Debts Expense. 5. 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. 6. Estimates bad debts expense related to the sales recorded in that period. Method Allowance Direct write-offarrow_forwardWhich following statement is a correct statement about the direct write-off method for calculating credit loss expense? A. It is in accordance with GAAP. B. It uses an allowance for credit losses account. C. It tends to understate accounts receivable on the balance sheet. D. It recognizes credit loss expense when a specific account is determined to be uncollectible.arrow_forwardMatch each of the following items with the appropriate definitions & don't give solution in image format..arrow_forward
- 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-offarrow_forwardFrom page 5-3 of the VLN, what is the appropriate relationship to compute net accounts receivable? Accounts receivable - Allowance for uncollectible accounts Accounts receivable - bad debt expense Accounts receivable - accumulated depreciationarrow_forwardWhich method of recording bad debt loss is consistent with accrual accounting? A. Allowance method B. direct write off method C. Percent of sales method D. Percent of accounts receivable methodarrow_forward
- Which of the following relationships best describes the percentage of receivables basis of valuing accounts receivable? O A. Matching, emphasis on statement of financial position relationships. O B. Matching, emphasis on income statement relationships. Oc. Cash realizable value, emphasis on statement of financial position relationships. O D. Cash realizable value emphasis on income statement relationships.arrow_forwardThe trade and other receivables note will include the following items? A. Debtors control + allowance for credit losses - prepaid expenses B. None of the above C. Debtors control - allowance for credit losses - accrued expenses D. Debtors control - allowance for credit losses + prepaid expenses E. Debtors control + allowance for credit losses + prepaid expensesarrow_forwardThe difference between accounts receivable and allowance for doubtful accounts is O a. the bad debt expense O b. the net realizable value of accounts receivable O c. the accounts receivable turnover O d. none of these choicesarrow_forward
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