7. Use the information provided in Question 6 about Tooele Company, but now assume the balance in the Allowance for Doubtful Accounts before adjusting entries is a $700 DEBIT. Which is part of the correct adjusting entry to record bad debt expense for the year? a. DEBIT Bad Debt Expense for $12,700 b. DEBIT Bad Debt Expense for $25,000 c. DEBT Bad Debt Expense for $25,700 d. DEBIT Bad Debt Expense for $13,200 e. DEBIT Bad Debt Expense for $12,500
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
USE TGHE FOLLOWING TO SOLVE FOR QUESTION7 ONLY
Tooele Company’s controller estimated bad debt expense using the percentage of accounts
receivable method. Total sales for the year were $500,000 of which 250,000 are on account.
The ending balance in accounts receivable was $100,000. An examination of the outstanding
accounts at the end of the year indicates that approximately 12 percent of these accounts will
ultimately prove to be uncollectible. Before any
Allowance for Doubtful Accounts is $700 (CREDIT). Which is part of the correct adjusting
entry to record bad debt expense for the year?
(The Allowance for Doubtful Accounts is also known as the Allowance for
Allowance for Uncollectible Accounts.)
a. CREDIT Allowance for Bad Debts for $11,300
b. DEBIT Allowance for Bad Debts for $11,300
c. CREDIT Allowance for Bad Debts for $12,000
d. CREDIT Allowance for Bad Debts for $12,700
e. DEBIT Allowance for Bad Debts for $14,700
5. Use the information provided in Question 4 about Tooele Company, but now assume the
balance in the Allowance for Doubtful Accounts before adjusting entries is a $700 DEBIT.
Which is part of the correct adjusting entry to record bad debt expense for the year?
a. DEBIT Bad Debt Expense for $12,700
b. DEBIT Bad Debt Expense for $11,300
c. CREDIT Bad Debt Expense for $12,700
d. CREDIT Bad Debt Expense for $11,300
e. DEBIT Bad Debt Expense for $12,000
6. Use the information provided in Question 4 about Tooele Company. The company now
decides to use the Percentage of Credit Sales Method for estimating uncollectible accounts.
Tooele Company estimates that 5% of total credit sales will ultimately prove to be uncollectible.
Which is part of the correct adjusting entry to record bad debt expense for the year?
a. DEBIT Bad Debt Expense for $11,300
b. DEBIT Bad Debt Expense for $25,000
c. DEBT Bad Debt Expense for $24,300
d. DEBIT Bad Debt Expense for $11,800
e. DEBIT Bad Debt Expense for $12,500
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