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 Loudouns recording the reestablishment of the receivable on April 4, Year 2?
| Assets | = | Liab. | + | Equity | Rev. | Expenses | = | Net Inc. | Cash Flow | ||||||||||
| A. | NA | = | 1,050 | + | (1,050 | ) | NA | 1,050 | = | (1,050 | ) | 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 | ) | NA | ||||||
| D. | NA | = | NA | + | NA | NA | NA | = | NA | NA | |||||||||
Multiple Choice
Option A
Option B
Option C
Option D
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Principles Of Financial Accounting Ch 1 17
Authors: Robert Libby, Patricia Libby, Fred Phillips, Stacey Whitecotton
1st Edition
0077370457, 9780077370459
