The following information applies to the questions displayed belowJ On January 1
ID: 2548330 • Letter: T
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The following information applies to the questions displayed belowJ On January 1, 2016, Kincald Company's Accounts Receivable and the Allowance for Doubtful Accounts carrled balances of $69,000 and $2,500, respectively. During the year Kincald reported $180,000 of credit sales. Kincald wrote off $1,600 of recelvables as uncollectible in 2016 Cash collections of recelvables amounted to $210300. Kincaid estimates that will be unable to collect one percent (1%) of credit sales. 21. The amount of uncollectible accounts expense recognized in the 2016 income statement will be: O $690 $1.600. $2101 O $1.800 22. Kincaid's entry to recognize the wrte-off of the uncollectible accounts wtt O decrease total assets and total equity. O increase total assets and total equity O not affect total assets or total equity O Increase total assets and decrease total equityExplanation / Answer
Question 21.
In percentage of sales method, the bad debt expenses are calculated as Credit sales multiplied by the percentage of sales. In this method, the balance in allowance for doubtful debt account is ignored while charging bad debts expenses.
Amount of uncollectible accounts expenses recognised in the year 2016= $180,000*1% = $1,800
Question 22.
In percentage sales method, the entry to write off the uncollectible accounts is Debit Allowance for doubtful debts and Credit Accounts receivable. This will not affect total assets or total equity as the provision made previously for doubtful debt is utilised for writting of the bad debts. Previously when this provision for doubtful debts is made, that time also it was deducted from the accounts receivable balance in the balance sheet and now it used to write off the accounts receivable.
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