Using the following categories, indicate the effects of the following transactions. Indicate the accounts affected and...
Using the following categories, indicate the effects of the following transactions. Indicate the accounts affected and the amounts. (Enter any decreases to Assets, Liabilities, or Stockholders Equity with a minus sign.)
- During the period, customer balances are written off in the amount of $10,800.
- At the end of the period, bad debt expense is estimated to be $8,800.
Homework Answers
Answer a.
Stockholder's equity decrease by $ 10,800
Assets decrease by $ 10,800.
Explanation:
If customers' balances are written off, it is bad debts which are the expense and it reduces stockholders' equity. Also, accounts receivables are reduced.
Answer b.
Stockholder's equity decrease by $ 8,800
Assets will Decrease by $ 8,800.
Explanation:
As bad debts are estimated at $ 8,800 for the next period, the provision will be made for the same amount. To make a provision, the expense is created and debtors are reduced.
In case of any doubt, please comment.
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