What is the correct answer for question number 4 to 10 And why? 5. A company\'s

Question

What is the correct answer for question number 4 to 10 And why?
5. A company's adjustment to record bad debt expense at year-end would most likely include a: a. Credit to Bad Debt Expense b. Credit to Accounts Receivable. c. Debit to Accounts Receivable. Credit to Allowance for Uncollectible Accounts 6. Pattie Corp. estimates uncollectible accounts based on the percentage of accounts receivable. What effect will recording the estimate of uncollectible accounts with an adjusting journal entry have on the accounting equation? a. Increase liabilities and decrease stockholders' equity b. Decrease assets and decrease liabilities. Decrease assets and decrease stockholders' equity d. Increase assets and decrease stockholders' equity.

Explanation / Answer

Solution : Answering the first 4 questions

5 . The periodic journal entry to book bad debts expense is

Bad debts Expense A/c..... Dr

To Allowance for doubtful debts A/c

Hence , option d is the correct answer i.e. a credit to allowance for uncollectible Accounts

6. Since the allowance is recognised based on the percentage of accounts receivable, the balance sheet approach has to be followed.Under this method the accounts receivable are recorded at net realizable value.

the journal entry would be the to debit bad debts expense A/c ( which reduces the shareholders equity or the profitability) and credit to allowance for uncollectible accounts ( this would be shown as a reduction to the overall balance of Accounts receivable.)

Hence the current answer is option C i.e. decrease assets and decrease stockholder's equity.

7. Accounts receivable balances are recorded at the gross value of all accounts receivables reduced by the allowance for doubful debts and other billing adjustments.

Hence, the current answer is option B i.e. Accounts Receivable minus Allowance for Uncollectible Accounts

8. The customer would get a discout of 2% if the customer would pay within the 60 day credit sale. This is a type of cash sales discount to encourage customer to pay the amont of cash in advance and allow the flow of working capital .

Hence the, 2% of 2,200 would be $44 would be a sales discount expense to Maverick Corp as the customer would pay only ( 2200-44) = $ 2,156.

Journal entry would be :

Cash A/c ..... .................. Dr 2,156

Sales Discount A/c .... ......Dr 44

To Accounts Receivable A/c $2,200 ( Being Amount of cash recieved after the customer availed the cash discount terms and conditions)

Hence the correct answer would be option d , Debit to Sales Discount by $ 44

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