Bay Company began using the allowance method in 2014. On January 1, 2014, Bay ha

Question

Bay Company began using the allowance method in 2014. On January 1, 2014, Bay had a $3,200 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2014, Bay provided $27,000 of service on account. The company collected $22,000 cash from account receivable. Uncollectible accounts are estimated to be 2% of sales on account.

The amount of uncollectible accounts expense to recognize on the 2014 income statement is:

Multiple Choice

$100.

$64.

$540.

$270.

Explanation / Answer

(Being allowance for the doubtfull debts made)

Calculation of estimated uncollected accounts: Services provided on the account during the year 2014 $27,000 Estimated uncollected accounts=2% of $27000 $ 540 Journal entry for bad debts expense: Bad debts expense debit $540 Allowance for the doubtfull accounts credit $540

(Being allowance for the doubtfull debts made)

Calculation of Accounts receivables at ending of balance: Accounts receivable account balance in the beginning $ 3,200 Add:Services which are provided on account during the year 2014 $ 27,000 Less:Cash which was corrected from the accounts receivable $ 22,000 Ending balance in accounts receivables $ 8,200 Calculation for the doubtful accounts at the ending of balence in allowance: For the Doubtfull accounts allowance at beginning balance - Add:Allowances made $540 Ending balance in the allowance for the doubtfull accounts is given as: $ 540

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.