Determining Financial Statement Effects of Write-Offs and Bad Debt Expense Using the Allowance Method

Using the following categories, indicate the effects of the following transactions. Indicate the accounts affected and the amounts. (Enter any decreases to Assets, Liabilities, or Stockholders Equity with a minus sign.)

During the period, customer balances are written off in the amount of $10,000.
At the end of the period, bad debt expense is estimated to be $8,000.

Assets =Liabilities +  Stockholders Equity

-8000=                                           - 8000

Explanation:

Allowance for Doubtful  Debts $10,000

Bad debt expense $8,000

Assets =Liabilities +  Stockholders Equity

-8000=                                           - 8000

The write off does not affect the realizable value of accounts receivable. Neither total assets nor net income is affected by the write off a specific account.Instead both assets and net income are affected in the period when bad debts expense is predicted and recorded with an adjusting entry.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

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