Indicate how each of the following transactions would affect AlarmIT Ltd.’s statement of income, statement of financial position, and statement of cash flows. If there would be no effect, then state that. AlarmIT uses the allowance method of accounting for bad debts.
1. AlarmIT recovered a $26,300 receivable from a customer whose account had been previously written off.
2. AlarmIT wrote off a receivable from a customer in the amount of $17,100.
3. AlarmIT recorded bad debts expense for the period totalling $51,800. The amount was determined based on an aging of accounts receivable.
I am attaching two screenshots that are of same statement but showing options from drop down arrow for choice that are available.
Homework Answers
| 1 | Statement of Income | No Effect | |
| Statement of Financial Position | Increase in Cash | $ 26,300 | |
| Increase in Allowance for Doubtful Accounts | $ 26,300 | ||
| Statement of Cash Flows | Increase in Cash Flow from Operations | $ 26,300 | |
| 2 | Statement of Income | No Effect | |
| Statement of Financial Position | Decrease in Accounts Receivable | $ 17,100 | |
| Decrease in Allowance for Doubtful Accounts | $ 17,100 | ||
| Statement of Cash Flows | No Effect | ||
| 3 | Statement of Income | Decrease in Income before taxes | $ 51,800 |
| Statement of Financial Position | Increase in Allowance for Doubtful Accounts | $ 51,800 | |
| Statement of Cash Flows | No Effect |
If you have any query, kindly comment with your query and please mark thumbs up.
| 1 | Statement of Income | No Effect | |
| Statement of Financial Position | Increase in Cash | $ 26,300 | |
| Increase in Allowance for Doubtful Accounts | $ 26,300 | ||
| Statement of Cash Flows | Increase in Cash Flow from Operations | $ 26,300 | |
| 2 | Statement of Income | No Effect | |
| Statement of Financial Position | Decrease in Accounts Receivable | $ 17,100 | |
| Decrease in Allowance for Doubtful Accounts | $ 17,100 | ||
| Statement of Cash Flows | No Effect | ||
| 3 | Statement of Income | Decrease in Income before taxes | $ 51,800 |
| Statement of Financial Position | Increase in Allowance for Doubtful Accounts | $ 51,800 | |
| Statement of Cash Flows | No Effect |
If you have any query, kindly comment with your query and please mark thumbs up.
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Bad debts expense must be reported under non-operating expenses
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Companies must report gross accounts receivable on the
statement of financial position.
The allowance for doubtful accounts must be reported in the
liabilities section of the statement of financial position.
Companies must report the carrying amount of accounts
receivable on the statement of financial position.
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