e Question 22 of 40 20. 21 O The following data are from the company\'s records

Question

e Question 22 of 40 20. 21 O The following data are from the company's records for 2013: Credit sales during the year $2,400,000 24. C Accounts Receivable-December 31, 2013410,000 25. C 55,000 Allowance for Doubtful Accounts--December 31, 2013 Bad debt expense for the year 70,000 27. O 28. method? 29. O Oa. Assets and stockholders' equity decrease 30 b. Assets decrease and stockholders' equity increases Refer to A2Z. Events What are the effets on the accounting equation when the company makes the adjustment to record bad debt expense using the allowance O e. Assets increase and stockholders' equity decreases O d. Assets increase and liabilities decrease 32. O 33. O Type here to search 6 0

Explanation / Answer

Answer:

A) Assets and Stock Holders' equity decrease

Explanation to the Answer :

In the Allowance method one has to pass the 2 step entry

First entry has to make at the time of the doubtful debts are estimated that is bad debts expense is recognized check out the following entry.

Bad Debts Expense

xx

Allowance for Doubtful Accounts

xx

and the second entry at the time it actually determined as uncollectible

Allowance for Doubtful Debts

xx

Accounts Receivable

xx

So net effect of this transaction is

Bad debt expanses decreas the stock holder's Equity and Accounts Receivable will decreases the assets

So option A) is correct :Assets and Stock Holders' equity decrease

Bad Debts Expense

xx

Allowance for Doubtful Accounts

xx

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