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27. An aging of a company\'s accounts receivable indicates that $4,500 are estim

ID: 2496486 • Letter: 2

Question

27. An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,600 debit balance, the adjustment to record bad debts for the period will require a

a.   debit to Bad Debt Expense for $4,500.

b.   debit to Bad Debt Expense for $6,100.

c.   debit to Bad Debt Expense for $2,900.

d.   credit to Allowance for Doubtful Accounts for $4,500.

28. Doane Company receives a $7,000, 3-month, 6% promissory note from Ray Company in settlement of an open accounts receivable. What entry will Doane Company make upon receiving the note?

a.   Notes Receivable                                               7,035

                  Accounts Receivable—Ray Company                    7,035

b.   Notes Receivable                                               7,105

                  Accounts Receivable—Ray Company                    7,000

                  Interest Revenue                                                         105

c.   Notes Receivable                                               7,000

      Interest Receivable                                               105

                  Accounts Receivable—Ray Company                    7,000

                  Interest Revenue                                                         105

d.   Notes Receivable                                               7,000

                  Accounts Receivable—Ray Company                    7,000

Explanation / Answer

27.

Total uncollectible amount is $ 4,500; already debited $ 1,600

Therefore, amount to be debited as bad ebt expense is $ 2,900 ($4,500 - $1,600). Hence, option c is correct.

28.

Notes Receivable                                               7,000

                  Accounts Receivable—Ray Company                    7,000

Option d is correct.

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