What was the journal entry needed to bring the

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What was the journal entry needed to bring the Allowance for Doubtful Debts to the required level after writing off the debt of Wriggler?Answer Selected Answer: Dr Bad Debts Expense..........$3000 Cr Allowance for Doubtful Debts..........$3000 Correct Answer: Dr Bad Debts Expense ..........$2875 Cr Allowance for Doubtful Debts..........$2875 Response Feedback: One way companies derive an estimate for the value of bad debts under the indirect method is to calculate bad debts as a percentage of the accounts receivable balance. Our first step in answering this question is to determine at what level the allowance for doubtful debts should stand at. But before we do so, we must first factor in Wriggler’s irrecoverable amount. We know that under the indirect method once an amount is deemed uncollectible we simply reduce accounts receivable and allowance for bad debt by equal amounts; a debit to allowance for doubtful debts, the contra-asset account, and a credit to accounts receivable account. Currently, Allowance for Doubtful Debt has a balance of $4,000. Thus, when we factor in wriggler’s $2,500 irrecoverable amount, the new balance is $1,500, and net accounts receivable is $87,500. Now we’re ready to determine what level the Allowance for doubtful debt should stand at. 5% of $87,500 is equal to $4,375. Thus, in order for the Allowance for Doubtful Debt account to stand at, or equal, $4,375, we need to increase
the Allowance for Doubtful debt account by a $2,875 ($4,375-$1,500) bad debt expense. Given the reasoning above, the answer is DDr bad debt expense 2875, and Cr allowance for doubtful debt 2,875, which increases the allowance to the required percentage level (5% of $87,500, or $4,375). Question 25 1 out of 1 points Which of the following are debits?Answer Selected Answer: decreases in owners’ equityCorrect Answer: decreases in owners’ equityResponse Feedback: A, B, and C are all increases in sources of finance, the right-hand side of the accounting equation. Assets = Shareholders’ Equity/Owners’ Equity + Liabilities.Accounts that fall under the right-hand side of the accounting equation have as their normal balance an entry on the right-hand side (credit balance) and are increased by credit entries and decreased by debit entries. Owners’ Equity has a credit balance; therefore, to decrease an account with a credit balance you must debit it –d. Question 26 1 out of 1 points A chart of accounts is:Answer Selected Answer: a list of the titles of all accounts in the ledger, together with an appropriate numbering system for the accounts Correct Answer: a list of the titles of all accounts in the ledger, together with an appropriate numbering system for the accounts Question 27 0 out of 1 points A customer provides a deposit of $500 000 near year-end. The product will not be delivered until next year. This transaction will:Answer Selected Answer: increase net profit, total assets and cash Correct Answer: increase total assets and cash but not net profit Response Feedback: Generally, a company records its revenue only when delivery of the product occurs. It is at the point of delivery that

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