The journal entry in the buyer’s books to record the honoring by the seller of a

Question

The journal entry in the buyer’s books to record the honoring by the seller of an account deemed uncollectible in a factoring

agreement with recourse would include a

debit to Bad Debt Expense

debit to Allowance for Uncollectible Accounts

debit to Cash

debit to Loss on Factoring Agreement

Bubba Co.’s beginning inventory at January 1 was understated by $100,000, and its ending inventory was overstated by

$120,000. Bubba’s cost of sales for the year would be

understated by $100,000

overstated by $100,000

understated by $220,000

overstated by $220,000

Dede entered into a 10-year lease of equipment for $5,000 a year, payable at the beginning of each year. At the end of the

lease, the equipment will probably be worthless. If Dede’s incremental borrowing rate is 10 percent and the lessor’s implicit

interest rate, which Dede is aware of, is 8 percent, Dede should record an

expense of $5,000

asset of $5,000

asset of $33,795

None of the above

debit to Bad Debt Expense

debit to Allowance for Uncollectible Accounts

debit to Cash

debit to Loss on Factoring Agreement

Bubba Co.’s beginning inventory at January 1 was understated by $100,000, and its ending inventory was overstated by

$120,000. Bubba’s cost of sales for the year would be

understated by $100,000

overstated by $100,000

understated by $220,000

overstated by $220,000

Dede entered into a 10-year lease of equipment for $5,000 a year, payable at the beginning of each year. At the end of the

lease, the equipment will probably be worthless. If Dede’s incremental borrowing rate is 10 percent and the lessor’s implicit

interest rate, which Dede is aware of, is 8 percent, Dede should record an

expense of $5,000

asset of $5,000

asset of $33,795

None of the above

Explanation / Answer

1. The correct answer is

debit to Allowance for Uncollectible Accounts

For the above transaction, the allowance for uncollectible accounts will be debited.

2. The correct option is

d. Overstated by $ 220000

If closing inventory is overstated the cost of goods sold also gets overstated and if opening invery gets understated the cost of goods will be overstated due to inverse relationship.

Hence $ 100000+$ 120000 = $ 220000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.