Vettori Ltd Has the Following Information from an Aged Debtors

question 40

Multiple Choice

Vettori Ltd has the following information from an aged debtors listing for the current period.

Based on experience in the industry, Vettori Ltd uses the following basis for estimating uncollectible amounts:

Assuming that the current balance in the provision for doubtful debts is zero, what is the entry to record the provision for this period? What is the entry to record the writing off of a bad debt of $1,000 when a debtor goes bankrupt?

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Definitions:

Adjusting Entries

Entries necessary at the end of the accounting period to measure all revenues and expenses of that period and update assets and liabilities.

Effective-Interest Method

A technique used in accounting to amortize the discount or premium on bonds payable over the life of the bonds more accurately than the straight-line method.

Bonds

Bonds are fixed-income securities that represent a loan made by an investor to a borrower, typically corporate or governmental, which pays periodic interest payments and the return of the principal at maturity.

Amortization

The gradual reduction of a debt or the spreading out of capital expenses for intangible assets over a specific period of time.