Answer:
The required adjusting entry to record estimated bad debts expense is as follows:
Debit Bad Debts Accounts with $39,960
Credit Allowance for Doubtful Accounts with $39,960
Being the adjustment to bring the Allowance for Doubtful Accounts up a new credit balance of $43,625.
Explanation:
The Allowance for Doubtful Accounts had a credit balance of $3,665. Since management had estimated that $43,625 of the Accounts Receivable balance would be uncollectible, this means that the difference $39,960 ($43,625 - $3,665) would be the adjusting amount to bring the balance up-to-date.
Remember that the Allowance for Doubtful Accounts is a contra account to the Accounts Receivable. It is used to reduce the balance of the Accounts Receivable based on collectibility judgement or estimate which management makes out of experience. The balance in this account is, therefore d,educted from the Accounts Receivable in the Balance Sheet in order to obtain the net Accounts Receivable balance.
The account that expenses the increase in this account is the Bad Debts Expense Account, which is taken to the Income Statement to reduce the income.
This is a tricky answer, because:
the length of the loan, the interest rate, and the down payment will all affect the total cost of the loan
--BUT--
your credit history can help determine the interest rate you are offered, the length of the loan offered, and the downpayment required.
I think this is an unfair question, but the answer the teacher is looking for is A. credit history because it has an INDIRECT effect on total cost and not a DIRECT effect like the others.
I would give homless people food clothes some cash and let them wash their hair. I would travel to Italy with my family and Hawaii. If I could have millions of dollars I would take it and use it for good.
