Purpose: Reinforce understanding of amounts reported on the financial statements for accounts receivable. BALANCE SHEET ACCOUNTS-December 31, Year 5 Accounts receivable Allowance for bad debts Accounts receivable, net $ 90,000 (4,000) 86,000 INCOME STATEMENT ACCOUNTS-Year 5 Sales revenue Bad debt expense $ 800,000 15,000 Refer to the information presented above to answer the following questions: Q1 22 Q3 Q4 g0 The allowance for bad debts is the portion of (accounts receivable/sales revenue) that is estimated as uncollectible and is reported on the balance sheet as a (current asset/noncurrent asset/current liability/noncurrent liability / stockholders' equity). The total amount customers owe the company on account on December 31, Year 5 is $ is estimated to be Of this amount, $ is estimated to be uncollectible and $ collectible. As a result of the financial statement information listed above, total assets will increase by $ Bad debt expense is the portion of (accounts receivable / sales revenue) that is estimated as uncollectible and reported as a(n) (operating /nonoperating) expenses on a multi-step income and of that amount, statement. Above, sales revenue earned during Year 5 totals $ $ is estimated to be uncollectible. Bad debt expense is a(n) (estimated / known) amount calculated (at the end of / during) each accounting period and recorded as an adjustment. This is an application of the (cost/matching/ historical cost) principle. The adjustment to record bad debt expense changes (total assets/net income/both / neither). Why? Q5 Above, the (allowance / direct write-off) method is used to report uncollectible accounts. Using the above amounts, assume that $2,000 owed by Customer Ryan was written off as uncollectible. After the write-off, the accounts would report: Accounts receivable ($88,000/$90,000/$92,000). Allowance for bad debts ($2,000/$4,000/$6,000), and Accounts receivable, net ($84,000 / $86,000/$88,000). The write-off of an uncollectible account changes (total assets / net income/ both/neither). Why? Note: Accounts receivable, net is also referred to as net realizable value. Bad debt expense is also referred to as doubtful-account expense or uncollectible account expense. Nonoperating revenues and expenses are also referred to as other gains and losses.