nline Ch 5-6 6 Help Save&Exit; Submi On December 31, Year 1 the Loudoun Corporat

Question

nline Ch 5-6 6 Help Save&Exit; Submi On December 31, Year 1 the Loudoun Corporation estimated that 3% of its credit sales of S112. OO would be uncolectibe Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1050 account and the account was written off On April 4, Year 2. this customer paid Loudoun the $1,050 Which of the following answers correctly states the effect of recording the collection of the reestablished receivable on April 4, Year Net Inc. Cash Flow NA NA+ NA B 1,050NA1,050 ,050 c. 1,050NA1,050 NA NA1,050 1,050 0A NA1,050),050 NA KAA 1,050 OA NA NA Mutiple Choice Option D Option 8 C Prev 20 of 35 Next 888.. 8 5

Explanation / Answer

Answer is Option B. Explanation: bad debts Expense (112500*3%): $ 3375 will be repporeted resulting in Decrease in income. Allowance for uncollectibel account of $3375 will be created resulting in decreasse in Accounts receivable Answer is Option D. There is no change in assets as the cahs will increase and Accounts receivable decrease. However, only change in trancsation will of cash inflows from Operating Activity is $1050

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