Question
In: Accounting
Saturn Company’s Accounts Receivable account has a balance of $2,400,000 at the end of the year,...
Saturn Company’s Accounts Receivable account has a balance of
$2,400,000 at the end of the year, and the company estimates the
Net Realizable Value of Accounts Receivable to be $2,304,000. The
Allowance for Doubtful Accounts has a credit balance of $54,000 at
the beginning of the current year, and during the year, Saturn
wrote off $45,000 of accounts receivable.
The year-end adjusting entry would require a:
Select one:
A. A credit to Allowance for Doubtful Accounts for
$105,000
B. A debit to Bad Debts Expense for $42,000
C. A debit to Bad Debts Expense for $87,000
D. A credit to Allowance for Doubtful Accounts for
$96,000
Solutions
Expert Solution
| Correct Option C. A debit to Bad Debts Expense for $87,000 | |||
| Beginning Credit balance allowance for doubtful accounts | 54,000 | ||
| Less: Accounts receivable written off | (45,000) | ||
| Current balance in allowance for doubtful accounts | 9,000 | ||
| Balance Required | 96,000 | (2400000-2304000) | |
| BAD DEBT EXPENSE TO BE DEBITED | 87,000 | ||
| Journal entry would be | |||
| Accounts Title and Explanation | Debit | Credit | |
| Bad debt Expense | 87,000 | ||
| Allowance for doubtful accounts | 87,000 | ||
| (To record bad debt expense) | |||
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