Lani Co. uses the allowance method to account for bad debts. At the end of 2010, their unadjusted trial balance shows an accounts receivable balance of $400,000

Lani Co. uses the allowance method to account for bad debts. At the end of 2010, their unadjusted trial
balance shows an accounts receivable balance of $400,000; allowance for doubtful accounts balance of
$400 (debit); and sales of $1,200,000. Based on history, Lani estimates that bad debts will be 1% of
accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in
the amount of:

$3,600
$12,400
$4.400
$11,600
$12,000
$4,000


The realization principle under IFRS refers to the following:

risk transfer and ownership reward
an arm's length transaction and economic benefits
reliable measurement and likelihood of economic benefits


Avi Co. raises cash by borrowing $10,000 and pledging $12,000 accounts receivables as security for the
loan. To comply with the full disclosure principle, Avi will record a journal entry in the amount of the
$10,000 note payable, and also record a (debit/credit/note)note to the financial statements, indicating
that $12,000 of accounts receivables have been pledged.



At year-end, Yates Company estimates that $1,500 of its accounts receivable balance is uncollectible.
Yates uses the allowance method to account for bad debts. The entry to record this adjusting entry would
include a:

debit to Allowance for Doubtful Accounts and credit to Bad Debts Expense
debit to Bad Debts Expense and credit to Accounts Receivable
debit to Bad Debts Expense and credit to Allowance for Doubtful Accounts
debit to Accounts Receivable and credit to Bad Debts Expense