Oakpark, Inc.’s $180,000 Accounts Receivable balance at December 31 consisted of
ID: 340667 • Letter: O
Question
Oakpark, Inc.’s $180,000 Accounts Receivable balance at December 31 consisted of $160,000 current balances and $20,000 past-due balances. At December 31, the Allowance for Doubtful Accounts had a credit balance of $1,600. Oakpark estimated that 2% of current balances and 15% of past-due balances will prove uncollectible.
The adjusting entry to record credit losses is:
A) Bad Debts Expense 5800
Allowance for Doubtful Accounts 5800
B) Bad Debts Expense 4600
Allowance for Doubtful Accounts 4600
C) Bad Debts Expense Accounts Receivable 4200
A/R 4200
D) Bad Debts Expense 7400
Allowance for Doubtful Accounts 7400
Explanation / Answer
Particulars Amount Allowance Rate Allowance Amt Current Balance 1,60,000 2% 3200 Past Due Balance 20,000 15% 3000 1,80,000 Total Allowance Closing Balance 6200 Less: Opening Balance Allowance Balance 1600 Net Balance to be charged to PL 4600 1 Bad Debt Expense Account Dr. 4600 To Allowance for Doubtful Accounts 4600 (Being Allowance difference recorded) Answer is B
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