If the provision for doubtful debt is increased, the accounting adjustment will be: Select one: a. Debit: Bad debt expense Credit: Trade receivables b. Debit: Bad debt expense Credit: Provision for bad debts c. Debit: Provision for bad debts Credit: Bad debt expense d. Debit: Trade receivables Credit: Bad debt expense

If the provision for doubtful debt is increased, the accounting adjustment will be: Select one: a. Debit: Bad debt expense Credit: Trade receivables b. Debit: Bad debt expense Credit: Provision for bad debts c. Debit: Provision for bad debts Credit: Bad debt expense d. Debit: Trade receivables Credit: Bad debt expense

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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We are currently working on Bad Debt expense and Receivables. Please see attachement.
Why does the Bad Debts Expense account usually not have the same adjusted balance as the Allowance for Doubtful Accounts?
Which of the following accounts are characterized as a "contra" account? (Select ALL that apply) O Equipment O Deferred Revenue OAccumulated Depreciation O Accounts Payable O Depreciation Expense O Sales Allowances O Sales return O Allowance for Uncollectible A/R O Bad Debt Expense O Accounts Receivable O Notes Payable O Cost of Goods Sold ASUS
how do companies account for bad debt? Why would they use an allowance account instead of directly crediting A/R? What are the various methods of accounting for bad debt? Describe the differences in how the expense is calculated.
Describe the allowance method used to estimate bad debts and the theoretical justification forits use.
Which is correct with regards to the effects of restricting credit standards? a. Investment in accounts receivable will likely increase b. An increase in recognition of doubtful accounts expense will probably happen c. Positive impact on the net profit can be noted from decline in the quantity of goods sold d. Quantity of units sold will probably decrease and will result to a lower sales revenue
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19.Which of the following statements is incorrect? a. Trade receivables are recognized simultaneously with the recognition of related revenue when the criteria for revenue recognition are met. b. Under the gross price method, sales discounts are reported as a deduction from sales revenue. c. When accounts receivable are pledged against borrowing, the amount of accounts receivable pledged shall be included in the total receivables with disclosures. d. When discounting notes, the term discount period refers to the period of time that the note has been held by the endorser or payee; i.e. the period from the date of the note up to the date of discounting.
Recording bad debt expense under the allowance method will have what effect on the financial statements? Select one: a. Profit is unchanged and total assets decrease b. Profit decreases and total assets is unchanged c. Profit is unchanged and total assets is unchanged d. Profit increases and total assets decrease e. Profit decreases and total assets decrease
Record bad debts using the direct write-off method.
Explain why writing off a bad debt against a company's Allowance for Doubtful Accounts does not diminish the estimated realizable value of its accounts receivable.