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College Accounting, Chapters 1-27 ...

22nd Edition
James A. Heintz + 1 other
Publisher: Cengage Learning
ISBN: 9781305666160

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BuyFindarrow_forward

College Accounting, Chapters 1-27 ...

22nd Edition
James A. Heintz + 1 other
Publisher: Cengage Learning
ISBN: 9781305666160
Chapter 16, Problem 4SEB
Textbook Problem
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COLLECTION OF ACCOUNT WRITTEN OFF—ALLOWANCE METHOD Raynette Ramos, owner of Ramos Rentals, uses the allowance method in accounting for uncollectible accounts. Record the following transactions in general journal form:

Chapter 16, Problem 4SEB, COLLECTION OF ACCOUNT WRITTEN OFFALLOWANCE METHOD Raynette Ramos, owner of Ramos Rentals, uses the

To determine

Prepare journal entries to record the given transactions.

Explanation of Solution

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for bad debts account.

Accounts receivable:

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Write-off:

Write-off refers to deduction of a certain amount from accounts receivable, when it becomes uncollectible.

Prepare journal entries to record the given transactions:

Table (1)

Justification on July 9th Transaction:

  • A decrease in allowance for doubtful accounts (contra asset account) will increase the asset account. Therefore, allowance for doubtful accounts is debited...

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Chapter 16 Solutions

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
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