Question

December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance me On thod of accounting for uncollectible accounts. In February of Year 2, f 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 the customer's account? states the effect of Loudoun Company's February Year 2 entry to write off Assets = Liab.+Equity Rev. - Expenses = Net Inc. Cash Flow A. NA = NA + NA NA -NA = NA NA NA B. (1,050) = NA + (1,050) (1,050)-NA = (1,050) NA c. (1,050) = (1,050)+NA NA-NA=NA NA D.NA = (1,050)+(1,050) NA-(1,050)-(1,050) NA.
1. Option C
2. Option B
3. Option D
4. Option A

Answer 1

Answer:

A. NA = NA + NA NA -NA = NA NA NA

Explanation:

As Year 2 the customer paid Loudoun the $1,050,which was written off On April 4, Year 1.

Therefore, the following journal entries to record the transaction.

Accounts receivable                     debit $1,050

Allowance for doubtful accounts credit $1,050

To record reinstatement of accounts receivable.

Cash                           debit $1,050

Accounts receivable credit $1,050

As one asset account is increase and another asset account is decreased.