Beltline Co. had credit sales of $100,000 for the year, and based on experience estimates that approximately 1% of these sales will be uncollectible. Under the percent of sales method, a.the adjusting entry to record the uncollectible sales would involve a debit to Allowance for Doubtful Accounts and a credit to Bad Debt Expense. b.the estimated uncollectible sales should not be recorded until there is firm evidence that a customer will not pay. c.the estimated bad debt expense is $1,000. d.the estimated bad debt expense is $10,000.
Beltline Co. had credit sales of $100,000 for the year, and based on experience estimates that approximately 1% of these sales will be uncollectible. Under the percent of sales method, a.the adjusting entry to record the uncollectible sales would involve a debit to Allowance for Doubtful Accounts and a credit to Bad Debt Expense. b.the estimated uncollectible sales should not be recorded until there is firm evidence that a customer will not pay. c.the estimated bad debt expense is $1,000. d.the estimated bad debt expense is $10,000.
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter16: Accounting For Accounts Receivable
Section: Chapter Questions
Problem 2CE: Tonis Tech Shop has total credit sales for the year of 170,000 and estimates that 3% of its credit...
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Concept explainers
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.
Question
1.) Beltline Co. had credit sales of $100,000 for the year, and based on experience estimates that approximately 1% of these sales will be uncollectible. Under the percent of sales method,
a.the adjusting entry to record the uncollectible sales would involve a debit to Allowance for Doubtful Accounts and a credit to Bad Debt Expense.
b.the estimated uncollectible sales should not be recorded until there is firm evidence that a customer will not pay.
c.the estimated bad debt expense is $1,000.
d.the estimated bad debt expense is $10,000.
2.) Under the percentage of receivables method theory,
a.the majority of
b.some portion of the existing accounts receivable will not be collected.
c.the percentage of uncollectible accounts is calculated as Average Uncollectible Accounts divided by Average Accounts Receivable.
d."some portion of the existing accounts receivable will not be collected" and "the percentage of uncollectible accounts is calculated as Average Uncollectible Accounts divided by Average Accounts Receivable" are true.
3.)
a.is acceptable for financial reporting purposes.
The direct write-off method
b.is required for income tax purposes.
c.is simple to apply.
d."is required for income tax purposes" and "is simple to apply" only.
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