Nebraska Bookshop Financial Review

Nebraska Bookshop Financial Review Name Institution Date 1. Journal entry to record the bad debts expense at year end Bad debts expense ($65,000*2.5%) - 210→$1, 625-$210= $1,415 Debit Credit Uncollectible Accounts Expense 1,415 Allowance for Uncollectible$1,415 2. Balance sheet presentation of the accounts receivable account Current Assets: Accounts Receivable$65,000  less allowance for doubtful accounts$1,415  Net Realizable value$63,585 3. Amount of bad debts expense that appears on the income statement. The bad debts expense to be recorded in the balance sheet as an expense is 2.5% of $ 65,000, which is $1,615. 4. Nebraska’s to use the direct write-off method for accounting for uncollectible accounts The direct write-off method records the uncollectible account expense related to customer accounts that have been identified as bad debts (Kimmel, Weygand, & Kieso, 2013). The debited account is the uncollectible accounts expense/ bad debt expense while the credited account is the accounts receivable as the debtor’s balance reduces (Kimmel, Weygand, & Kieso, 2013). The approach contravenes the matching principle when recording the revenues and expenses, but it is still used to record bad debt when the amount involved is insignificant. The amounts are insignificant and there is no concern in using the direct write-off method, but as the account receivable increases the amounts will be material. The amount of bad debt expense recorded increases, but the recorded sales does not decrease, and there are delays recognizing expenses and may show that the reporting entity is more profitable than it is in the short-term. 5. Measures Nebraska can implement to minimize his write-offs and reasons why investors would be concerned about write-offs Investors are concerned when a reporting entity has higher than normal...