When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when

management estimates the amount of uncollectibles More test answers on https://studyhippo.com/acc-89/

When a specific account becomes uncollectible & must be written off: a. Allowance for Doubtful Accounts should be credited. b. Accounts Receivable should be credited. c. Bad Debts Expense should be credited. d. Sales should be debited.

b. Accounts Receivable should be credited. More test answers on https://studyhippo.com/financial-accounting-exam-4/

When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when: a. a sale is made. b. an account becomes bad & is written off. c. management estimates the amount of uncollectibles. d. a customer’s account becomes past-due.

c. management estimates the account of uncollectibles. More test answers on https://studyhippo.com/financial-accounting-exam-4/

RyTronics uses the percentage of receivables method for estimating bad debts expense. The Accounts Receivable balance is $100,000 at year-end and the total credit sales were $800,000. Management estimates that 4% of receivables will be uncollectible. What adjusting entry will be recorded if the Allowance for Doubtful Accounts has a credit balance of $800 before adjustment?

Bad Debts Expense 3,200 Allowance for Doubtful Accounts 3,200 More test answers on https://studyhippo.com/accounting-ch8/

Bright Electronics uses the percentage of receivables method for estimating bad debts expense. The Accounts Receivable balance is $120,000 at year-end and the total credit sales were $900,000. Management estimates that 4% of receivables will be uncollectible. What adjusting entry will be recorded if the Allowance for Doubtful Accounts has a credit balance of $600 before adjustment?

Bad Debts Expense 4,200 Allowance for Doubtful Accounts 4,200 More test answers on https://studyhippo.com/practice-test-1-4/

Oak Company uses the percentage-of-receivables method for recording bad debts expense. The accounts receivable balance is $60,000 at year-end. The total credit sales were $2,300,000 for the year. Management estimates that 3% of receivables will be uncollectible. What adjusting entry should be made if the Allowance for Doubtful Accounts has a debit balance of $200 before the year-end adjusting entry for Bad Debt Expense?

Bad Debts Expense 2,000 Allowance for Doubtful Accounts 2,000 More test answers on https://studyhippo.com/practice-test-1-4/

A company uses the allowance method to measure bad debts, A) the Allowance for Bad Debts account is debited when the bad debts expense is estimated B) the Bad Debts Expense account is debited when an account is written off C) Accounts Receivable will be reported on the Balance Sheet at net realizable value D) the Allowance for Bad Debts account balance is added to the balance of the Accounts Receivable account to arrive at the net realizable value

Accounts Receivable will be reported on the Balance Sheet at net realizable value More test answers on https://studyhippo.com/financial-accounting-comprehensive-problems-56315/

The existing balance in Allowance for Doubtful Accounts is considered in computing bad debts expense in the

percentage of receivables basis More test answers on https://studyhippo.com/acc-89/

Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited

when an account is determined to be worthless More test answers on https://studyhippo.com/acc-201/

If a company fails to record estimated bad debts expense: a. cash realizable value is understated. b. expenses are understated. c. revenues are understated. d. receivables are understated.

b. expenses are understated. More test answers on https://studyhippo.com/financial-accounting-exam-4/

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Bad Debts Expense Flashcards, test questions and answers

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What is Bad Debts Expense?

Bad debts expense is a type of business expense that occurs when a customer or client fails to pay their bill. This can occur for a variety of reasons, such as inability to pay due to financial hardship, or simply unwillingness on the part of the customer. In any case, bad debt write-offs are an unfortunate but necessary part of doing business. When bad debts are incurred, businesses must record them on their income statements as an expense that reduces total revenue and profits. Generally Accepted Accounting Principles requires businesses to use the allowance method when recognizing uncollectible accounts as expenses on their books. Under this method, businesses estimate how much they think they will not be able to collect from customers who have not paid and record it as an expense in their income statement. Recording bad debt expenses is important because it helps companies accurately reflect the true state of their financial standing by subtracting lost revenue from total sales. It also ensures accuracy when calculating taxable income by reducing taxable revenue with uncollectible amounts deducted from sales figures reported for tax purposes. Bad debts are unavoidable in certain industries where credit is extended to customers or clients who may be unable to meet payment obligations due to economic hardships or other unforeseen circumstances. Although these types of losses cannot be prevented completely, companies can take steps such as instituting credit checks and extending shorter payment terms in order to reduce their exposure to bad debt write-offs and protect profit margins from any future losses incurred through nonpayment by customers or clients.