Question

Kieso, Intermedlate Accounting, Joe Help I System Announcements CALCULATOR PRINTER VERSION BACK NEXT Multiple Choice Question 98 Waterway Industries has outstanding accounts receivable totaling $6.47 million as of December 31 and sales on credit during the year of $23.2 million. There is also a credit balance of $12000 in the allowance for doubtful accounts. If the company estimates that 5% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year? O $ 33550o. O $ 32350o. O $ 1160000. $311500 Click if you would like to Show Work for this question: Open Show Work Question Attempts: O of 1 sed SAVE FOR LATER SUBMIT ANSW

Answer 1

Answer

• The correct answer is Option #4: $ 311,500
• Working for above answer

A	Accounts receivables on Dec 31	$          6,470,000.00
B = A x 5%	5% Uncollectible = Adjusted ending balance of Allowance account	$              323,500.00 Credit
C [given]	Unadjusted Allowance for Doubtful account balance	$                12,000.00 Credit
D = B - C	Amount of Bad Debt Expense by which Allowance account need to be credited with to maintain $ 323,500 Credit balance	$              311,500.00

• Journal Entry would be:

Accounts titles	Debit	Credit
Bad Debt Expense	$ 311,500.00
Allowance for Doubtful accounts		$ 311,500.00

• Additional Working:

5% Uncollectible Accounts receivables		$ 323,500.00
Unadjusted Allowance account balance	$    12,000.00
Bad Debt Expense	$ 311,500.00
Adjusted Balance of Allowance for Doubtful accounts		$ 323,500.00