FARE Q&S Sim. p.294 Sim. 14-16

3. In year 2, the company reviewed its accounts receivable and determined that $26,000 of accounts receivable that had been carried for years appeared unlikely to be collected. 

My question) To account for the uncollectible A/R, why did you record $26,000 debit to Loss (FARE sim-7 lecture)? The book's answer also looks like $26,000 is subtracted from income from continuing operations before taxes of $1,210,000 (no explanation in the book). 

My opinion) When we determine that A/R is uncollectible, the general entry should be 

                    Allowance for doubtful accounts $26,000

                                                                                           A/R $26,000

                   Since there are no effects on I/S, we do not have to adjust income from continuing operations before taxes of $1,210,000 for this additional transaction.                     

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CAS Director

bad debt expense  / allowance for uncollectible account 는 estimation 으로 예상되는 금액을 미리 잡아놓습니다. 그 이외에 발생한 금액은 loss 처리하게 됩니다.