Question

In: Accounting

Which of the following is the difference between the ending accounts receivable balance and its reported...

Which of the following is the difference between the ending accounts receivable balance and its reported net value?

Select one:

a. Bad Debt Expense

b. Loss on Sale

c. Gain on Sale

d. Allowance for Doubtful Accounts

e. Depreciation on Accounts Receivables

Solutions

Expert Solution

allowance for doubtful account is created based on estimates of bad debts

it is calculated by mulitplying percentage estimates of bad debts with accounts receivables due for different days(0-30,30-60,60-90 days)

allowance for doubtful account have credit balance. it is a contra asset and shown as deduction from account receivable on balance sheet.

bad debt should be expensed in t he period of sales to follow matching principle concept of book keeping.

So whether or not actual bad debt occurs, allowance is created and accounts receivables are reduced.

Accounts receivable are shown as follows on balance sheet:

ending accounts receivables XXXX
Less: allowance for doubtful account (XXXX)
Net realizable value XXXX

Answer is d.

a.bad debt expense: incorrect as it is expensed on income statement and doesnot affect receivables.

b/c. incorrect they are not related to accounts receiavble account. Gain loss occures when assets are sold.

d. correcta s explained above

e. Incorrect there is nothing like depreciation on accounts receivables. It is totally irrelevant.

Please upvote if you find this helfpul

ekkarill92 answered 1 year ago
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