Demetri Companys Accounts Receivable Account has a debit balance of $1.800.000,

Question

Demetri Companys Accounts Receivable Account has a debit balance of $1.800.000, and the Allowance for Doubtful Accounts has a debit balance of $4.000 at the end of the year before adjustment. An analysis of their customers, accounts estimates that 2% of year end account receivable will be uncollectible. The adjusting journal entry for doubtful accounts will include: Select one A. Debit Bad Debts Expense $326.000 B.Credit Allowance for Doubtful Accounts, $36.000 C.Credit Allowance for Doubtful Accounts $32.000 D.Debit Bad Debts Expense $40.000

Explanation / Answer

Q1. Answer is C. Credit Allowance for Doubtful Debts $ 32000 Explanation: Allowance balance required at the end: (1800000*2%) 36000 Less: Actual balance in Allowance 4,000 Bad debts expense 32,000 Journal Entry: bad debts expense Dr. 32000      Allowance for doubtful debts 32000 Q2. Answer is B. $ 41600 Explanation: Ending Balance of Accounts receivable 50000 AdD: Wwrite off 3600 Add: Cash collected 250000 Less: Credit sales 262000 Beginning balance of AR 41600 Q3. Answer is C. $ 12960 Explanation: Beginning Allowance balance 11940 Less: Write off 12900 balance actual in Allowance Account 960 Dr Balance required in Allowance (600,000*2%) 12000 Bad debts expense 12960

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