Loose Leaf for Financial Accounting: Information for Decisions
9th Edition
ISBN: 9781260158762
Author: John J Wild
Publisher: McGraw-Hill Education
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Chapter 7, Problem 5DQ
Summary Introduction
Introduction:
To state:The explanation of discounting a baddebt against theallowance for doubtful accounts does not diminish the estimated realizable value of accounts receivable.
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Explain why writing off a bad debt against the Allowance for Doubtful Accounts does not reduce the estimated realizable value of a company’s accounts receivable.
Explain why writing off a bad debt against a company's Allowance for Doubtful Accounts does not diminish the estimated realizable value of its accounts receivable.
Explain why writing off a bad debt against the Allowance for Doubtful Accounts does not diminish a company's accounts receivables' estimated realizable value.
Chapter 7 Solutions
Loose Leaf for Financial Accounting: Information for Decisions
Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQ
Ch. 7 - Prob. 1QSCh. 7 - Solstice Company determines on October 1 that it...Ch. 7 - Solstice Company determines on October 1 that it...Ch. 7 - The following list describes aspects of either the...Ch. 7 - Gomez Corp. uses the allowance method to account...Ch. 7 - Prob. 6QSCh. 7 - Prob. 7QSCh. 7 - Prob. 8QSCh. 7 - On August 2, Jun Co. receives a $6,000, 90-day,...Ch. 7 - Prob. 10QSCh. 7 - Prob. 11QSCh. 7 - Prob. 12QSCh. 7 - Prob. 13QSCh. 7 - Prob. 14QSCh. 7 - Prob. 1ECh. 7 - Prob. 2ECh. 7 - Prob. 3ECh. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - Prob. 7ECh. 7 - Prob. 8ECh. 7 - Prob. 9ECh. 7 - Prob. 10ECh. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Prob. 14ECh. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Prob. 17ECh. 7 - Prob. 18ECh. 7 - Prob. 1PSACh. 7 - Prob. 2PSACh. 7 - Prob. 3PSACh. 7 - Prob. 4PSACh. 7 - The following selected transaction are Ohlm...Ch. 7 - Prob. 1PSBCh. 7 - At December 31, 2018, Ingleton Company reports the...Ch. 7 - Prob. 3PSBCh. 7 - Prob. 4PSBCh. 7 - Prob. 5PSBCh. 7 - Prob. 7SPCh. 7 - Prob. 1GLPCh. 7 - Prob. 1FSACh. 7 - Prob. 2FSACh. 7 - Prob. 3FSACh. 7 - Prob. 1BTNCh. 7 - Prob. 2BTNCh. 7 - Prob. 4BTNCh. 7 - Sheryl Sandberg and Mark Zuckerberg of Facebook...
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- Which method delays recognition of bad debt until the specific customer accounts receivable is identified? A. income statement method B. balance sheet method C. direct write-off method D. allowance methodarrow_forwardWhich account type is used to record bad debt estimation and is a contra account to Accounts Receivable?arrow_forwardWhich of the following estimation methods considers the amount of time past due when computing bad debt? A. balance sheet method B. direct write-off method C. income statement method D. balance sheet aging of receivables methodarrow_forward
- Shimmer Products is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estimated at 5.6% of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 13.7% percent of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0–30 days past due at 5%, 31–90 days past due at 21%, and over 90 days past due at 30%. There is currently a zero balance, transferred from the prior years Allowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet. There is also additional information regarding the distribution of accounts receivable by age. Prepare the year-end adjusting entry for bad debt, using A. Income statement method B. Balance sheet method of receivables C. Balance sheet aging of receivables method D. Which method should the company choose, and why?arrow_forwardBad Debt Expense When a company has a policy of making sales for which credit is extended, it is reasonable to expect a portion of those sales to be uncollectible. As a result, a company must recognize bad debt expense. The two methods of recognizing bad debt expense are the (1) direct write-off method and (2) allowance method. Required: 1. Describe fully both the direct write-off method and the allowance method of recognizing bad debt expense. 2. Explain the reasons why one of these methods is preferable to the other and the reasons why the other method is not usually in accordance with generally accepted accounting principles.arrow_forwardWhat is an earnings management benefit from showing a reduced figure for bad debt expense?arrow_forward
- The dollar difference between Accounts Receivable and Allowance for Doubtful Accounts is called (a) book value. (b) interest value. (c) carrying value. (d) net realizable value.arrow_forwardOrganics Plus is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estimated at 4% of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 12% of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0–30 days past due at 6%, 31–90 days past due at 19%, and over 90 days past due at 26%. There is currently a zero balance, transferred from the prior years Allowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet. There is also additional information regarding the distribution of accounts receivable by age. Prepare the year-end adjusting entry for bad debt, using A. Income statement method B. Balance sheet method of receivables C. Balance sheet aging of receivables method. D. Which method should the company choose, and why?arrow_forwardAnswer the following questions in depth .... Isn't estimating bad debts a way of manipulating net income? How does a company keep control on these estimates? How does one go about determining if noncollectable receivables are within a reasonable range?arrow_forward
- How would the transactions be reconciled if the allowance for bad debt is converted to a bad debt write off but the company is able to recoup the funds?arrow_forwardExplain the typical way companies account for uncollectible accounts receivable (bad debts). When is it permissible to record bad debt expense only at the time when receivables actually prove uncollectible?arrow_forwardExplain the typical way companies account for uncollectible accounts receivable (bad debts). When is it permissible to record bad debt expense only at the time when receivables prove uncollectible?arrow_forward
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