6. A company ages its accounts receivables to determine its end of period adjust

Question

6. A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $22,250 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $1,750. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? A. A. Bad Debts Expense 22,250 Allowance for Doubtful 22,250 B. B. Bad Debts Expense 20,500 Allowance for Doubtful 20,500 Accounts C. |c. |Accounts Receivable 24,000 Allowance for Doubtfu 24,000 Accounts D. D. Accounts Receivable 22,250 Bad Debts Expense 1.750 Sales 24,000 E . Bad Debts Expense 24,000 Allowance for Doubtful 24,000 Accounts

Explanation / Answer

Answer- 6:

Desired Balance in Allowance for Doubtful Accounts = 22,250 (credit)

Current Balance in Allowance for Doubtful Accounts = 1,750 (debit)

Amount required to bring the allowance account up to its required balance = 24,000

Date

Account title

Debit

Credit

Bad Debts Expense

24000

   Allowance for Doubtful Accounts

24000

Hence, Option – E is correct.

Answer- 4:

When a company use the direct write-off method, it records bad debts expense when it determines that a specific customer account is uncollectible. So the journal entry is :

Date

Account title

Debit

Credit

Bad Debts Expense

$

   Accounts Receivables

$

   Hence, Option – D is correct.

Answer- 5:

     Total Amount of Bad Debts = (205,000 * 10%) = 20,550

Less: Balance in Allowance for Doubtful Accounts = 2,500

    Net Amount of Bad Debt Expense to be recognised = 18,050

Hence, Option – E is Correct.

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Date

Account title

Debit

Credit

Bad Debts Expense

24000

   Allowance for Doubtful Accounts

24000

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