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sleet_krkn [62]
3 years ago
6

Use the following information to answer the next two questions: Harris Company uses the allowance method of handling its credit

losses. It estimates credit losses at 1.5% of credit sales, which were $2,700,000 during the year. On December 31, the Accounts Receivable balance was $475,000, and the Allowance for Doubtful Accounts had a balance of $30,600 before adjustment. Indicate the effect (increase / decrease) that recording the bad debt expense for the year will have on the company's assets, liabilities, and equity, respectively. Assets Liabilities+ Equity Select one:
a. Decrease, No Change, Decrease
b. Increase, No Change, Decrease
c. Increase, No Change, Increase
d. Decrease, Decrease, No Change
e. Increase, Decrease, Increase
Business
2 answers:
barxatty [35]3 years ago
7 0

Answer:

a. Decrease, No Change, Decrease

Explanation:

This can be explained as follows

New Allowance for Doubtful Accounts = $2,700,000 × 1.5% = $40,500

Increase in Allowance for Doubtful Accounts = $40,500 - $30,600 = $9,900

The increase in the Allowance for Doubtful Accounts will reduce the Accounts Receivable balance by $9,900 because it will be added to the Allowance for Doubtful Accounts balance of $30,600 and affect Accounts Receivable as follows:

Accounts Receivable balance on December 31 after adjustment = $475,000 – ($30,600 + $9,900) = $434,500.

The increase of $9,990 in Allowance for Doubtful Accounts will decrease Accounts Receivable which an asset, and will also reduce equity because the $9,900 will be used to reduce the earning or retained earning which is an equity item. This does not and will not have any effect on the liability item.

Therefore, correct option is Decrease in asset, No Change in liabilities, Decrease in equity.

Arte-miy333 [17]3 years ago
4 0

Answer:

a)Decrease, No Change, Decrease

b) -Correct Answer is Option 'B' $ 403,900

--Workings

Accounts receivables, gross  $475,000

Less:  

Allowance account unadjusted balance $30,600  

Bad Debt Expenses [2700000 x 1.5%] $40,500  

Adjusted balance of Allowance account  $71,100

Net Realizable value of Accounts receivables [475000 - 71100] $403,900

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timurjin [86]

Answer: Three items will appear being;

2. Sale of delivery truck at book value

5. Sale of a debt security held as an available-for-sale investment

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Explanation:

The Investment Section of the Cash Flow Statement contains activities related to investment such as the buying or selling of fixed assets and the buying or selling of other company stocks or bonds.

Out of the above therefore, there are 3 activities that would fall under this section of the Cash Flow Statement.

They are;

2. Sale of delivery truck at book value.

- This refers to the sale of a Fixed asset and as such it goes to the investment section.

5. Sale of a debt security held as an available-for-sale investment.

- As a debt security of another firm that was considered available for sale, this goes to the Investment Section as well.

6. Collection of loan receivable.

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7 0
3 years ago
A decrease in interest rates will:__________.
Allisa [31]

Answer:

c. not affect the bond's duration.

Explanation:

The bond duration measures the sensitivity of a bond's price to change in the interest rate. It is a linear measure of those years in which the repayment of the principal is due. the change in interest rate does not affect the duration of the bond.

On the other hand decrease in interest rate would increase the bond's PV and Price of the bond as well.

Payment frequency would not change with the decrease interest rate.

The Coupon rate will also remain the same whether the interest rate increases or decreases.

5 0
3 years ago
The cashier for Bell Buoy rang up sales totaling $5,104, but had $5,120 to deposit, which journal entry would be recorded? Multi
alexandr402 [8]

Answer:

A debit to Cash for $5,120, a credit to Cash Overage for $16, and a credit to Sales Revenue for $5,104.

Explanation:

In the current situation, the cash received is in excess of revenue recorded, thus, there will be cash overage.

As per books cash shall be $5,104 but since actual cash is $5,120 there is cash overage of $16

Therefore, for this, actual cash received shall be debited = $1,520

Cash overage shall be credited for $16

And accordingly sales of $5,104 shall be recorded as a credit.

Thus, correct option is: Entry A

3 0
3 years ago
In the context of mobile marketing, ________ are released by businesses to help consumers access more information about their co
Irina-Kira [14]

Answer: Applications (Apps)

Explanation: In mobile marketing companies introduce the use of applications which involves either or both of web apps and mobile apps.

Customers can easily gain access to information about the company on their app and can also interact with the company through their app.

Some purchase can also be made on some companies apps.

7 0
3 years ago
Art invested $100 two years ago at 8 percent interest. The first year, he earned $8 interest on his $100 investment. He reinvest
nikitadnepr [17]

Answer:

Option 4- Interest on Interest

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Look we earned $8 in the first year which we invested in the same business. Okay now we again earned 8% on this $100 and $8 invested in the second year. The 8% on the $8 is $0.64 which is the interest earned on the interest invested in the previous year.

4 0
3 years ago
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