Jones CoSells on Credit and Maintains an Allowance for Doubtful Accounts

question 110

Multiple Choice

Jones Co.sells on credit and maintains an allowance for doubtful accounts equal to 2% of the company's $3,450,000 receivables balance.Due to a cash shortfall,Jones sells $275,000 of its receivables with recourse to Ninth National Bank,and the bank withholds $12,000 from the factoring proceeds to cover possible noncollections.If the noncollections eventually amount to $15,000,the entry on Jones' books when notified of this fact would be:

• A) \(\begin{array}{l}
• \text { DR Allowance for doubtful accounts }&3,000 \\
• \text { CR Accounts receivable (specific customers) }&&3,000
• \end{array}\)
• B) \(\begin{array}{lr}
• \text {DR Allowance for doubtful accounts }&15,000\\
• \text { CR Accounts receivable (specific customers)}&&15,000
• \end{array}\)
• C) \(\begin{array}{lr}
• \text { DR Bad Debt expense}&3,000\\
• \text {CR Cash }&&3,000\\
• \end{array}\)
• D) \(\begin{array}{lr}
• \text {DR Allowance for doubtful accounts }&15,000\\
• \text {CR Due from Ninth National Bank }&&12,000\\
• \text {CR Cash }&&3,000\\
• \end{array}\)

---

Definitions:

Travel Away

The situation in which an individual is working or conducting business away from their normal workplace, potentially affecting tax deductions for travel expenses.

Incidental Expenses

Minor or secondary expenses that occur during the process of conducting business or performing a service.

Personal Property

Property that includes movable items such as furniture, cars, and investments, as opposed to real estate.

200% Declining-Balance Rate

A method of accelerated depreciation allowing for a double rate of depreciation on assets, compared to the straight-line method.