On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit

Question

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Lodon uses the allo ence method of accounting for uncollectible accounts. In Febraary of Year 2, one of Loudoun's customers faled to pay his $1050 account and the account was written off On Apra 4, Year 2, this customer paid Loudoun the $1,050 Which of the following answers correctly states the effect of recording the collection of the reestablished receivable on April 4, Year 2? -Expenseset Inc. Cash Flow NANA A. 8. 1,050 NA + 1,050 C. 1,050 Na + 1,050 D. NA A + NA 1,050 NA = 1,050 1,050 OA (1,050) 1,050 i,050 on NAA 1,050 QA Muhpie Choice Option Option A Opton D

Explanation / Answer

Answer

Entry is following for bad debts recovery:

Dr Bank(assets) $1050
Cr Bad debts recovered (income) $1050

So, answer is option B

Assets 1050 = Liab. NA + Equity 1050   Revenue 1050 - Expenses NA = Net Inc.1050   Cash Flow 1050

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