FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of
Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050.
Which of the following correctly states the effect of recording the collection of the reestablished receivable on April 4, Year 2?
A.
B.
ܫ
C.
D.
Assets
1,050 (1,050)
1,050
1,050
1,050 (1,050)
Multiple Choice
Option B
Option D
Option C
Option A
Balance Sheet
=Liabilities +
ΝΑ
ΝΑ
ΝΑ
ΝΑ
Stockholders'
Equity
ΝΑ
1,050
1,050
ΝΑ
Income Statement
Revenue
ΝΑ
1,050
ΝΑ
ΝΑ
Expense
ΝΑ
ΝΑ
(1,050)
ΝΑ
=
Net
Income
ΝΑ
1,050
1,050
ΝΑ
Statement
of Cash
Flows
ΝΑ
1,050 OA
1,050 OA
1,050 OA
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Transcribed Image Text:On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following correctly states the effect of recording the collection of the reestablished receivable on April 4, Year 2? A. B. ܫ C. D. Assets 1,050 (1,050) 1,050 1,050 1,050 (1,050) Multiple Choice Option B Option D Option C Option A Balance Sheet =Liabilities + ΝΑ ΝΑ ΝΑ ΝΑ Stockholders' Equity ΝΑ 1,050 1,050 ΝΑ Income Statement Revenue ΝΑ 1,050 ΝΑ ΝΑ Expense ΝΑ ΝΑ (1,050) ΝΑ = Net Income ΝΑ 1,050 1,050 ΝΑ Statement of Cash Flows ΝΑ 1,050 OA 1,050 OA 1,050 OA
Expert Solution
Check Mark
Step 1 Introduction

The account receivables is the current assets for the business. The allowance for doubtful accounts is treated as contra assets and has the credit balance.

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