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Please help me with this question. Thank you so much! Year-end METHODS OF ACCOUNTING FOR BAD DEBTS DIRECT WRITE-OFF METHOD ALLOWANCE METHOD Accounts for bad
Please help me with this question. Thank you so much!
Year-end METHODS OF ACCOUNTING FOR BAD DEBTS DIRECT WRITE-OFF METHOD ALLOWANCE METHOD Accounts for bad debts from an uncollectible account At the end of each accounting period, receivable at the time account is determined to be bad debts expense is uncollectible estimated and recorded. Adjusting entry required: Bad Debt Expense XXX Allowance Uncollectible Accounts XXX No adjusting entry (The amount is an estimate based on a percentage of sales or a percentage of outstanding accounts receivable. If the estimate is based on sales, the full estimate is used in the adjusting entry. If the estimate is based on accounts receivable the allowance account balance is brought to the amount of the estimate.) Write-off entry required: Write-off entry required: Bad Debts Expense XXX Allowance for Uncollectible Accounts XXX Accounts Receivable/Customer XXX Accounts Receivable/Customer XXX (The amount is the balance of the uncollectible account.) The amount is the balance of the uncollectible account.) 1. Reinstate account by reversing write-off: 1. Reinstate account by reversing write-off Accounts Receivable/Customer XXX Accounts Receivable/Customer XXX Bad Debts Expense XXX Allowance for Uncollectible Accounts XXX (The amount is the account balance that was written oft.) (The amount is the account balance that was written off.) 2. Record collection on account normally: 2. Record collection on account normally: Cash XXX Cash XXX Accounts Receivable/Customer XXX Accounts Receivable/Customer XXX (The amount is the amount collected.) (The amount is the amount collected.) When an account is determined to be uncollectible When an account previously written off is recovered Review the above illustration table and express your opinion on the following theme: 1) What are the advantages and disadvantages of both bad debts methods? 2) Which method is required by GAAP rule? 3) Provide your answer and comments for the following multiple choice question. According to GAAP, the amount of bad debt expense can be estimated by: A. Only the percent of sales method. B. Only the percent of accounts receivable method. C. Only by the aging of accounts receivable method. D. Only by the percent of sales method or the percent of accounts receivable method. E. Bad debt expense can be estimated by the percent of sales method, the percent of accounts receivable method, or by the aging of accounts receivable methodStep by Step Solution
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