Question

X Company calculates that this year year's estimated bad debts expense will be $7500. When X...

X Company calculates that this year year's estimated bad debts expense will be $7500. When X Company makes the adjusting entry, what will be the effect on the following?

Bad/Doubtful Debt Expense

Allowance for Doubtful Debts

Gross Account Receivable

a. No affect / Increase / Decrease

b. No affect / Decrease / No affect

c. Increase / Increase / No affect

d. Increase / No effect / Decrease

Business   Accounting   
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Homework Answers

Answer #1

Solution :

Answer : The Answer is (c) Increase / Increase / No affect.

Explanation : The Company has estimated that bad debts expnses will be $ 7,500 for this comany will create bad debts alllowance passing the following entry :

Bad Debts Expenses $ 7,500
Allowane for Doubtful debts $ 7,500

This will increase bad debts expenses and allowance for doubtful debts, however the gross receivable will be intact.

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