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Case Study As at 31 December 2018, ABC Limited (ABC) had a net balance of...

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Accounting

Case Study As at 31 December 2018, ABC Limited (ABC) had a net balance of accounts receivable of $9,000, representing a gross amount of $9,100 due from a customer, BBA Limited (BBA), less the allowance for doubtful accounts of $100. Closing inventory of $3,000 was held as at 31 December 2018 (being 100 units at $30 each). Market value of the inventory was estimated to be well-above the costs. On 5 January 2019, ABC purchased 300 units of inventories at $32 each and paid by cash. On 10 January 2019, ABC sold 150 units of goods to BBA for a gross price of $6,000 in total. This was a credit sale with terms 2/10, n/30. ABC adopts gross method in accounting for cash discount. On 25 January 2019, ABC collected $15,100 from BBA for all the amounts due. Question Which of the following adjusting entry is correct in respect of the bad debt expense in ABCs book in January 2019?

Select one: A. Dr. Accounts Receivable $100 / Cr. Allowance for Doubtful Accounts $100

B. Dr. Allowance for Doubtful Accounts $100 / Cr. Accounts Receivable $100

C. Dr. Bad Debt Expense $100 / Cr. Allowance for Doubtful Accounts $100

D. Dr. Allowance for Doubtful Accounts $100 / Cr. Bad Debt Expense $100

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