On January 1, 2012 the Accounts Receivable and the Allowance for Doubtful Accoun

Question

On January 1, 2012 the Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $30,000 and $500, respectively. During the year the company reported $75,000 of credit sales. There were $550 of receivables written-off as uncollectible in 2012. Cash collections of receivables amounted to $74,550. The company estimates that it will be unable to collect one percent (1%) of credit sales.

The entry to recognize the write-off of an uncollectible account will:

increase total assets and total equity.
increase total assets and decrease total equity.
decrease total assets and total equity.
not affect total assets or total equity.

The entry required to recognize the uncollectible accounts expense for 2012 will:

increase total assets and retained earnings.
decrease total assets and retained earnings.
decrease total assets and increase net income.
increase total assets and decrease net income.

The net realizable value of receivables appearing on the December 31, 2012 balance sheet will amount to:

$29,200.
$30,450.  
$29,750.
$24,300.

Explanation / Answer

The entry to recognize the write-off of an uncollectible account will:

decrease total assets and total equity.

The entry required to recognize the uncollectible accounts expense for 2012 will:

decrease total assets and retained earnings.

The net realizable value of receivables appearing on the December 31, 2012 balance sheet will amount to:

$29,200.

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