Question

Blackhorse Productions, Inc., used the aging of accounts receivable method to estimate that its Allowance for Doubtful Accounts should be $21,550. The account had an unadjusted credit balance of $10,900 at that time.
a. The appropriate bad debt adjustment was recorded.
b. Later, an account receivable for $1,900 was determined to be uncollectible and was written off.

Required:
For each transaction listed above, indicate the amount and direction for increase or-for decrease) of effects on the financial statement accounts and on the overall accounting equation.

Answer 1

Answer:

A. Assets=Liabilities + Shareholders' equity

=$10,650 -$10,650

B . Assets = Liabilities + Shareholders' equity

-$1,900 = -$1,900

Explanation:

To indicate the amount and direction for increase or-for decrease of effects

a)Dr Bad Debt Expense $10,650

($21,550 - $10,900)

Cr Allowance for Doubtful Accounts $10,650

Assets = Liabilities + Shareholders' equity

=$10,650 -$10,650

b)Dr Allowance for Doubtful Accounts $1,900

Cr Accounts Recivables $1,900

Assets = Liabilities + Shareholders' equity

-$1,900= -$1,900