8.Abbott Company uses the allowance method of accounting for uncollectible accou

Question

8.Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of credit sales will be uncollectible. On January 1, Allowance for Doubtful Accounts had a credit balance of $2,400. During the year, Abbott wrote off accounts receivable totaling $1,800 and made credit sales of $100,000. There were no sales returns during the year. After the adjusting entry, the December 31 balance in Bad Debt Expense will be

a.$3,000

b.$1,200

c.$7,200

d.$3,600

10. A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is

a.debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060

b.debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Receivable, $120

c.debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Revenue, $120

d.debit Cash, $6,120; credit Notes Receivable, $6,120

Explanation / Answer

8 Bad Debt Expense = 100000*3% = 3000 Option A is correct 10 Debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Revenue, $120 Option C is correct

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