[tingting8429]

Tuesday is my exam day. I really need help with this two accounts

Allowance for doubtful account decrease, Bad Debt Expense decrease, and A/R increase, right?

Investment on subsidiary decrease, Cash increase, and equity decrease, right?

Is my thinking right or wrong?

[leglock]

Im having a lil trouble understanding exactly what u are not sure about. But with respect to doubtful accounts, per gaap you cant use direct write off method, you must make an accrual for bad debts. So you debit bad debts expense and credit allowance for doubtful accounts. Those are increases to those two accounts. Then when you are certain a specific customer is not going to pay and you are going to write off that specific account, you tKe it out of a4da and put it in accts rec so debit a4da and credit accts rec which decrease both of those accounts

The second part about investment hopefully someone will answer

[Anonymous]

Basic transactions for Indirect Method –

1) Set up:

Dr Bad Debt Expense

Cr Allowance for Doubtful Accnts

2) Write off:

Dr Allowance for Doubtful Accnts

Cr A/R

3) Recovery:

Dr A/R

Cr Allowance for Doubtful Accnts

Dr Cash

Cr A/R

As far as your other question, sorry not clear what you're asking there. Are you talking about accounting for equity investment?

[tingting8429]

@czechchamp Yes. I am talking about accounting for equity investment. Please

[Anonymous]

Purchase of Inv.:

Dr Investment

Cr Cash

% of Income from Inv.:

Dr Investment

Cr Equity in Earnings (I/S)

% of Dividends Received:

Dr Cash

Cr Investment

Record Depreciation / Amortization / Impairment of the excess:

Dr Equity in Earnings (I/S)

Cr Investment

Note that they typically ask about your Investment (= B/S account) or effect on I/S (= changes in Equity in Earnings).

[Author]

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