Question

TB 08-14 TechCom has $40,000 in outstanding accounts ...

TechCom has $40,000 in outstanding accounts receivable. Past experience suggests that 5% of outstanding receivables are uncollectible. The current balance in the allowance for doubtful accounts is $2,500 debit. The required adjusting journal entry includes a debit to bad debt expense for $4,500.

True or False

TrueFalse...

During the current year, TechCom concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on TechCom's current year net income and balance sheet assuming the allowance method is used to account for bad debts?

Multiple Choice

• No effect on net income or on total assets

• Increase in net income; no effect on total assets

• No effect on net income; decrease in total assets

• Decrease in net income; no effect on total assets

• Decrease in net income; decrease in total assets

• TB 08-68 On December 31

  On December 31 of the current year, TechCom's unadjusted trial balance included the following items: Accounts Receivable, debit balance of $107,250; Allowance for Doubtful Accounts, credit balance of $1,900. What amount should be debited to Bad Debt Expense, assuming 6% of outstanding accounts receivable as of December 31 of the current year, are estimated to be uncollectible?

  Multiple Choice

• $6,435

• $4,535

• $8,335

• $2,835

• $3,755

Answer 1

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TechCom
TB 08-14	Amount $
Outstanding accounts receivable	40,000.00
Allowance %	5%
Allowance amount	2,000.00
Add: Debit balance in allowance for doubtful accounts	2,500.00
Bad debt expense for the year	4,500.00
So answer is true.
As allowance is already created so write off accounts receivable will not affect net income but it will decrease accounts receivable.
So answer is- No effect on net income; decrease in total assets
TB 08-68
Outstanding accounts receivable	107,250.00
Allowance %	6%
Allowance amount	6,435.00
Less: Credit balance in allowance for doubtful accounts	1,900.00
Bad debt expense for the year	4,535.00
So answer is $ 4,535.