On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit

Question

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun ses the allow an e method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was witten off. On April 4, Year 2, this customer paid Loudoun the $1050 Which of the folowing answers correctly states the effect of the December 31, Year 1 adjusting entry for uncollectible accounts on the fnancial statements of the Loudoun Corporation? Liab. Equity Rev. Expenses Net Inc. Cash Flow NA NA NA a. (3,375) “ 3,375 B. (3,375 ) NA + (3,375) NA - C. 3,375+3375 NA D. NA 3,375 =(1,375) NA 13,375)3,375 3,375 Qu NA - NA NA Muiple Choke Option A ) Option o Option

Explanation / Answer

Answer b. The Journal Entry to be passed: Particulars Dr. Amt. Cr. Amt. Bad Debt Expenses    3,375.00    Allowance for Uncollectible Accounts    3,375.00 Bad Debt Expenses - Expenses Increased - Net Income Decreased - Equity Decreased Allowance For Uncollectible Accounts - Accounts Receivable Decreases - Assets Decreases

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