Question
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 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 of accounting for uncollectible accounts. In February of 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 answers correctly states the effect of recording the collection of the reestablished receivable on April 4, Year 2?
| | Assets | = | Lab. | + | Equity | Rev. | − | Expenses | = | Net Inc. | Cash Flow | ||||||
| A. | NA | | = | NA | + | NA | | NA | | − | NA | | = | NA | | NA | |
| B. | 1,050 | | = | NA | + | 1,050 | | 1,050 | | − | NA | | = | 1,050 | | 1,050 | OA |
| C. | 1,050 | | = | NA | + | 1,050 | | NA | | − | (1,050 | ) | = | 1,050 | | 1,050 | OA |
| D. | NA | | = | NA | + | NA | | NA | | − | NA | | = | NA | | 1,050 | OA |
| | |||||||||||||||||
Multiple Choice
Option A
Option B
Option C
Option D
Step by Step Solution
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Step: 1
Due to reinstatement of accounts receivable the following journal entry is passed Accounts rece...
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Step: 2
Step: 3
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Intermediate Accounting
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
1st edition
978-0133251579, 133251578, 013216230X, 978-0134102313, 134102312, 978-0132162302
