Ask Question
7 September, 10:58

Oakpark, Inc.'s $180,000 Accounts Receivable balance at December 31 consisted of $160,000 current balances and $20,000 past-due balances. At December 31, the Allowance for Doubtful Accounts had a credit balance of $1,600. Oakpark estimated that 2% of current balances and 15% of past-due balances will prove uncollectible. The adjusting entry to record credit losses is:A) Bad Debts Expense 5800Allowance for Doubtful Accounts 5800B) Bad Debts Expense 4600Allowance for Doubtful Accounts 4600C) Bad Debts Expense Accounts Receivable 4200A/R 4200 D) Bad Debts Expense 7400Allowance for Doubtful Accounts 7400

+1
Answers (1)
  1. 7 September, 14:17
    0
    B) Bad Debts Expense 4600 Allowance for Doubtful Accounts 4600

    Explanation:

    Before passing the adjusting entry, we have to do the calculations which are shown below

    The computation of the credit loss is shown below:

    = Estimated amount - Estimated uncollectible account - Account receivable ending balance

    where,

    Estimated amount = Account receivable ending balance * given percentage

    = $160,000 * 2%

    = $3,200

    And, the estimated uncollectible amount = Past due balance * estimated percentage

    = $20,000 * 15%

    = $3,000

    The other item values remain the same

    Now put the values to the above formula

    So, the value would be equal to

    = $3,200 + $3,000 - $1,600

    = $4,600

    Now the journal entry would be

    Bad debt expense A/c Dr $4,600

    To Allowance for Doubtful Accounts $4,600

    (Being credit losses are recorded)
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Oakpark, Inc.'s $180,000 Accounts Receivable balance at December 31 consisted of $160,000 current balances and $20,000 past-due balances. ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers