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Annette [7]
2 years ago
11

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudou

n uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050.
Which of the following answers correctly states the effect of the December 31, Year 1 adjusting entry for uncollectible accounts on the financial statements of the Loudoun Corporation?

Assets = Liab. + Equity Rev. − Expenses = Net Inc. Cash Flow
A. (3,375) = 3,375 + NA NA − NA = NA NA
B. (3,375) = NA + (3,375) NA − 3,375 = (3,375) NA
C. 3,375 = NA + 3,375 NA − (3,375) = 3,375 3,375 OA
D. NA = NA + NA NA − NA = NA NA
Business
1 answer:
Naddika [18.5K]2 years ago
8 0

Answer:

The correct answer is B. (3,375) = NA + (3,375) NA − 3,375 = (3,375) NA.

Explanation:

The question asks for the effect of the adjusting entry on December 31, Year 1, that is, the creation of the 3% allowance for uncollectible debts.

Allowance for bad debts = 3% x $112,500 = $3,375

Its effect is as follows.

Assets: Since accounts receivable (an asset) is reduced, assets are reduced  by $3,375.

Liabilities: No effect.

Equity: As Equity = Assets - Liabilities, the net effect is to reduce the equity by $3,375.

Revenue: No effect.

Expenses: Sales worth $3,375 is written off as an expense. Hence, total expenses increase by $3,375.

Net increase: As revenue remains unchanged while expenses increase by $3,375, the net increase is a negative of $3,375.

Cash flow: No effect, because there is no exchange of cash since the amount of $3,375 was never received by Loudoun Corporation.

These entries correspond to option B. which is thus the correct answer.  

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notsponge [240]

Answer:

Cash flow from operating activities

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<u><em>Adjustment to reconcile net income to </em></u>

<u><em>net Cash flow from operating activities</em></u>

Depreciation expense                                    $26,350

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Decrease current liabilities                            <u>-$26,350</u>

Net cash flow from operating activities                              $348,250

Cash flow from investing activities

Sale of investment                                           $12,100

Purchase of equipment                                 -<u>$89,900</u>

Net cash used investing activities                                       -<u>$77,800</u>

Cash flow from financing activities

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Net cash used financing activities                                       -<u>$66,000</u>

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6 0
2 years ago
CalcuCo hired Effner &amp; Associates to design a new computer-aided manufacturing facility. The new facility was designed to pr
andriy [413]

Answer:

$953 per unit

Explanation:

For computing the average cost per unit first we have to determine the operating capacity at 85% after that the total cost which is shown below:

Operating capacity at 85% is

= 300 computers × 85%

= 255 computers

Now the total cost is

= Variable cost + Fixed cost

where,

Variable cost is

= $660 × 255 computers

= $168,300

And, the fixed cost is $74,700

So, the total cost is

= $168,300 + $74,700

= $243,000

Now the average cost per unit is

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6 0
3 years ago
Is the loss in efficiency due to market power large or​ small? explain. the loss in efficiency due to market power is?
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Answer:

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jasenka [17]
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mezya [45]

Answer:

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Thanks!

7 0
3 years ago
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