A major customer filed for bankruptcy

  • Creator
    Topic
  • November 10, 2015 at 3:33 pm #198162
    Anonymous
    Inactive

    During the course of the year 2 audit of the company, the auditor discovered the following situation. Please identity the adjusting entries.

    At the end of year 2, a major customer filed for bankruptcy.

    My answer: Dr. Allowance for Doubtful Accounts

    Cr. Accounts Receivable

    I still think that all the accounts receivables from that major clients are invalid now.

    Correct answer: Dr. Operating Expenses

    Cr. Allowance for Doubtful Accounts

    Can anybody help me? I will have an AUD exam very soon.

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