ACCT 301 Lecture 8: Accounting Study Guide Ch 08
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Illustrating the allowance method or recognizing bad debts. A. ware (write-off of r. a. ware account) Note that the expense is recognized in the period that the sale took place and that the. Contra account allowance for bd is used to create a net value for a/r. Assume hampson furniture has credit sales of ,200,000 in 2004, of which ,000 remains uncollected at december 31. The credit manager estimates that ,000 of these sales will prove uncollectible. The adjusting entry to record the estimated uncollectibles is: This entry has no effect on cash flows. The allowance for doubtful accounts is a contra asset account and is shown on the balance sheet as a reduction from accounts receivable. Therefore hampson"s balance sheet would report accounts receivable as follows: Assume that the vice-president of finance of hampson furniture on march 1, 2005, determines that a balance owed by r. a.
