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)

ekkarill92 answered 1 year ago

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