Under the allowance method of recording bad debts what is th

Under the allowance method of recording bad debts, what is the effect of writing off a specific customer\'s account that has been determined to be uncollectible? Select one: a. Has no effect on Bad Debt Expense b. Decreases the net realizable value of Accounts Receivable c. Increases the net realizable value of Accounts Receivable d. Increases the Allowance for Doubtful Accounts On December 31, 2018, a company sells a plant asset that originally cost $20,000 and had accumulated depreciation of $14,000 for $4,000. The company should recognize a Select one: ? a. $2,000 loss on disposal b.$2,000 gain on disposal C. $10,000 gain on disposal d. $10,000 loss on disposal

Solution

Answer 1 The answer is Option a. The journal entry for Writing off a specific customer account under allowance method is as under, Account Titles Debit Credit Allowance for doubtful accounts Accounts Receivables The above journal entry for writing off a specific customer account has no effect on Bad debt expense. Answer 2 Calculation of gain/loss on sale of plant asset Sale value of plant asset $4,000.00 Less : Book value [$20000 - $14000] $6,000.00 Loss on sale of plant asset -$2,000.00 The answer is Option a i.e. $2000 loss on disposal. Answer 3 Under Perpetual inventory system , inventory accounts are updated after each purchase or sale. Whereas under , periodic inventory system , purchase account is updated continuously and inventory account is updated priodic basis. Cost of goods sold is one of the inventory account. Hence the answer is Option c.