A2Z Events
The following information is from the company's records for Year 1:
$\begin{array}{llr}
\text {Credit sales during the year } &\$2,400,000\
\text { Accounts receivable-December 31, Year 1 } &410,000\
\text {Allowance for doubtful accounts-December 31, Year 1 } &55,000\
\text {Bad debt expense for the year } &70,000\
\end{array}$

-Refer to the figure A2Z Events.What are the effects on the accounting equation when the company makes the adjustment to record bad debt expense using the allowance method?

Question

A2Z Events
The following information is from the company's records for Year 1:
 $\begin{array}{llr}
  \text {Credit sales during the year  } &\$2,400,000\
 \text { Accounts receivable-December 31, Year 1 } &410,000\
 \text {Allowance for doubtful accounts-December 31, Year 1  } &55,000\
 \text {Bad debt expense for the year  } &70,000\
\end{array}$

-Refer to the figure A2Z Events.What are the effects on the accounting equation when the company makes the adjustment to record bad debt expense using the allowance method?

Quizplus · Accepted Answer

When a company records bad debt expense using the allowance method, it increases the allowance for doubtful accounts (a contra asset account) and records bad debt expense, which reduces net income and, consequently, shareholders' equity. The total assets decrease because the net accounts receivable decreases, while liabilities remain unchanged.

A2Z Events the Following Information Is from the Company's Records

A2Z Events
the Following Information Is from the Company's Records