Transaction3 December 31, 78: the unadjusted credit balance of the Allowance for

Question

Transaction3 December 31, 78: the unadjusted credit balance of the Allowance for Doubtful Accounts account is $6,000. Bad debt expense is estimated to be 3.5% of net sales of $800,000. Present the necessary year-end adjusting entry related to uncollectible accounts.

What is the amount of the adjustment?

800,000 b. 28,000 c. 22,000 d. 6,000 e. 210

2. Indicate the account title to be debited

a. Account receivable b. allowance for doubtful account c. bad debt expense

d. Cash e. sales revenue

3. Indicate the account title to be credited

a. Account receivable b. allowance for doubtful account c. bad debt expense

d. Cash e. sales revenue

mima purchased 3-year insurance plan ( effective 7/1/y8 through 6/30/y11) for $3,600 cash

4. Indicate the account title to be debited by $3,600

acct payable b. allowance for insurance c. cash d. insurance expense. E. prepaid insurance

Indicate the account title to be credited by $3,600

a. acct payable b. allowance for insurance c. cash d. insurance expense. E. prepaid insurance

Explanation / Answer

Transaction Dec 31. Details Amt $ 1 Net Sales               800,000 Bad debt expense @3.5% of net sales                 28,000 As the bad debt expense accounting is by % sales method , the addition to Allowance for doubtful a/c will be = $28000 So Answer is b. 28000 2 Account to be debited is Bad Debt Expense Answer is c. 3 Account to be credited is Allowance for Dobtful Accounts . So answer is b. 4 Account to be debited in Prepaid Expense Answer is E. Account to be credited is Cash. Answer is c.

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