Question 1

Which of the following results from recording bad debts expense under the allowance method?

Accepted Answer

A)  A decrease in Bad Debts Expense 
B)  An increase in Allowance for Doubtful Accounts 
C)  An increase in Revenue 
D)  A decrease in Uncollectible Accounts 
A)  A decrease in Bad Debts Expense 
B)  An increase in Allowance for Doubtful Accounts 
C)  An increase in Revenue 
D)  A decrease in Uncollectible Accounts B

Question 2

EasyLearn Inc., a book publishing company, uses the allowance method of accounting for bad debts expense. During the year, an amount of $2,000 was determined to be uncollectible from a customer; the credit balance in the Allowance for Doubtful Accounts is $3,000. Which of the following journal entries records the write off of the uncollectible customer account?

Accepted Answer

A)  Debit Bad Debts Expense by $2,000, and credit Accounts Receivable by $2,000. 
B)  Debit Bad Debts Expense by $2,000, and credit Allowance for Doubtful Accounts by $2,000. 
C)  Debit Allowance for Doubtful Accounts by $2,000, and credit Accounts Receivable by $2,000. 
D)  Debit Accounts Receivable by $2,000, and credit Allowance for Doubtful Accounts by $2,000. 
A)  Debit Bad Debts Expense by $2,000, and credit Accounts Receivable by $2,000. 
B)  Debit Bad Debts Expense by $2,000, and credit Allowance for Doubtful Accounts by $2,000. 
C)  Debit Allowance for Doubtful Accounts by $2,000, and credit Accounts Receivable by $2,000. 
D)  Debit Accounts Receivable by $2,000, and credit Allowance for Doubtful Accounts by $2,000. C

Question 3

The direct write-off method of accounting for bad debts expense is not allowed under GAAP (generally accepted accounting principles).

Accepted Answer

A) True 
 B)False  True

Question 4

The allowance method of accounting for bad debts expense is consistent with the accrual basis of accounting as it matches revenues of one year with expenses of the same year.

Accepted Answer

A) True 
 B)False

Question 5

Kiara Inc. follows the direct write-off method of accounting for bad debts expense. The total revenue for the year is $600,000, but the company could collect only $580,000; the rest were uncollectible. What is the journal entry to record the accounting treatment of the bad debt expense by Kiara Inc.?

Accepted Answer

Bad debts expense = Total revenue - Tota

Question 6

Allowance for Doubtful Accounts is used under the direct write-off method of accounting for bad debts expense.​

Accepted Answer

A) True 
 B)False

Question 7

In the allowance method of accounting for bad debts expense, Bad Debts Expense account is debited, and Accounts Receivable is credited when an uncollectible account is written off.

Accepted Answer

A) True 
 B)False

Question 8

Glowra Company uses the allowance method of accounting for debt debts expense. At the beginning of the current year, the Allowance for Doubtful Accounts had a credit balance of $5,000 and the Accounts Receivable had a debit balance of $20,000. In the current year, an amount of $200 is determined to be uncollectible, and is recorded in the books correctly. Which of the following statements is true of the accounting treatment of the bad debts expense? ​

Accepted Answer

A)  The balances of Accounts Receivable and Allowance for Doubtful Accounts increase by $200. 
B)  Adjusting entries for accounting the bad debts expense are made directly into the Bad Debts Expense account. 
C)  The balances of Accounts Receivable and Allowance for Doubtful Accounts decrease by $200. 
D)  No adjusting entries are made, and the bad debts expense is charged directly to the net profit account. 
A)  The balances of Accounts Receivable and Allowance for Doubtful Accounts increase by $200. 
B)  Adjusting entries for accounting the bad debts expense are made directly into the Bad Debts Expense account. 
C)  The balances of Accounts Receivable and Allowance for Doubtful Accounts decrease by $200. 
D)  No adjusting entries are made, and the bad debts expense is charged directly to the net profit account.

Question 9

Which of the following accounting equations is used to compute assets?

Accepted Answer

A)  Assets = Liabilities - Capital + Drawing - Revenue + Expenses 
B)  Assets = Liabilities + Capital - Drawing - Revenue + Expenses 
C)  Assets = Liabilities + Capital - Drawing + Revenue - Expenses 
D)  Assets = Liabilities - Capital + Drawing + Revenue - Expenses 
A)  Assets = Liabilities - Capital + Drawing - Revenue + Expenses 
B)  Assets = Liabilities + Capital - Drawing - Revenue + Expenses 
C)  Assets = Liabilities + Capital - Drawing + Revenue - Expenses 
D)  Assets = Liabilities - Capital + Drawing + Revenue - Expenses

Question 10

Which of the following is a disadvantage of the direct write-off method of accounting for bad debts expense?

Accepted Answer

A)  The direct write-off method requires complex computation for the estimation of bad debts expense. 
B)  The direct write-off method requires extra adjusting entries to write off bad debts. 
C)  The direct write-off method is not consistent with the accrual basis of accounting. 
D)  The direct write-off method requires additional journal entries to be passed through Allowance for Doubtful Accounts. 
A)  The direct write-off method requires complex computation for the estimation of bad debts expense. 
B)  The direct write-off method requires extra adjusting entries to write off bad debts. 
C)  The direct write-off method is not consistent with the accrual basis of accounting. 
D)  The direct write-off method requires additional journal entries to be passed through Allowance for Doubtful Accounts.

Question 11

Which of the following is true of the treatment of bad debts expense in the allowance method of accounting for bad debts?

Accepted Answer

A)  Bad debts expense is provided in advance by estimating the expenses. 
B)  Bad debts expense is credited in the adjusting entry to create provision for bad debts. 
C)  Bad debts expense is recorded as the difference between the estimated and actual uncollectible accounts. 
D)  Bad debts expense is treated as a deduction from Accounts Receivable. 
A)  Bad debts expense is provided in advance by estimating the expenses. 
B)  Bad debts expense is credited in the adjusting entry to create provision for bad debts. 
C)  Bad debts expense is recorded as the difference between the estimated and actual uncollectible accounts. 
D)  Bad debts expense is treated as a deduction from Accounts Receivable.

Question 12

Markley Company's total sales on account for the year amounted to $360,000 including cash sales of $60,000. The company estimates that 2% of its total credit sales will be uncollectible. If Markley uses the allowance method of accounting for bad debts expense, the bad debts provided for is equal to:

Accepted Answer

A)  $6,000. 
B)  $7,200. 
C)  $1,200. 
D)  $1,800. 
A)  $6,000. 
B)  $7,200. 
C)  $1,200. 
D)  $1,800.

Question 13

Which of the following is true about a credit balance in Allowance for Doubtful Accounts at the end of a year?

Accepted Answer

A)  More accounts receivable were actually written off as uncollectible during the year than estimated previously. 
B)  Bad debts expense in the period was overstated and net income was understated. 
C)  Bad debts expense in the period was understated and net income was overstated. 
D)  Accounts receivable estimated as uncollectible is equal to the bad debts expense written off during the year. 
A)  More accounts receivable were actually written off as uncollectible during the year than estimated previously. 
B)  Bad debts expense in the period was overstated and net income was understated. 
C)  Bad debts expense in the period was understated and net income was overstated. 
D)  Accounts receivable estimated as uncollectible is equal to the bad debts expense written off during the year.

Question 14

Upstart Enterprise's total revenue for last year is $300,000, and it estimates 2% of revenue as bad debts. Which of the following journal entries records the bad debts expense under the allowance method?

Accepted Answer

A)  Debit Allowance for Doubtful Accounts by $6,000, and credit Bad Debts Expense by $6,000. 
B)  Debit Accounts Receivable by $6,000, and credit Bad Debts Expense by $6,000. 
C)  Debit Bad Debts Expense by $6,000, and credit Accounts Receivable by $6,000. 
D)  Debit Bad Debts Expense by $6,000, and credit Allowance for Doubtful Accounts by $6,000. 
A)  Debit Allowance for Doubtful Accounts by $6,000, and credit Bad Debts Expense by $6,000. 
B)  Debit Accounts Receivable by $6,000, and credit Bad Debts Expense by $6,000. 
C)  Debit Bad Debts Expense by $6,000, and credit Accounts Receivable by $6,000. 
D)  Debit Bad Debts Expense by $6,000, and credit Allowance for Doubtful Accounts by $6,000.

Question 15

Which of the following is a similarity between the allowance method and the direct write-off method of accounting for bad debts?

Accepted Answer

A)  Both the methods require an estimate of bad debt expense. 
B)  Both the methods provide for writing or charging off of uncollectible customers' accounts. 
C)  Both the methods are consistent with the accrual basis of accounting. 
D)  Both the methods are allowed under GAAP (generally accepted accounting principles).
​ 
A)  Both the methods require an estimate of bad debt expense. 
B)  Both the methods provide for writing or charging off of uncollectible customers' accounts. 
C)  Both the methods are consistent with the accrual basis of accounting. 
D)  Both the methods are allowed under GAAP (generally accepted accounting principles).
​

Which of the following results from recording bad debts expense under the allowance method?

The direct write-off method of accounting for bad debts expense is not allowed under GAAP (generally accepted accounting principles).

The allowance method of accounting for bad debts expense is consistent with the accrual basis of accounting as it matches revenues of one year with expenses of the same year.

Allowance for Doubtful Accounts is used under the direct write-off method of accounting for bad debts expense.

In the allowance method of accounting for bad debts expense, Bad Debts Expense account is debited, and Accounts Receivable is credited when an uncollectible account is written off.

Which of the following accounting equations is used to compute assets?

Which of the following is a disadvantage of the direct write-off method of accounting for bad debts expense?

Which of the following is true of the treatment of bad debts expense in the allowance method of accounting for bad debts?

Markley Company's total sales on account for the year amounted to $360,000 including cash sales of $60,000. The company estimates that 2% of its total credit sales will be uncollectible. If Markley uses the allowance method of accounting for bad debts expense, the bad debts provided for is equal to:

Which of the following is true about a credit balance in Allowance for Doubtful Accounts at the end of a year?

Upstart Enterprise's total revenue for last year is $300,000, and it estimates 2% of revenue as bad debts. Which of the following journal entries records the bad debts expense under the allowance method?

Which of the following is a similarity between the allowance method and the direct write-off method of accounting for bad debts?

Asset, Liability, Owners Equity, Revenue, and Expense Accounts

T Accounts, Debits and Credits, Trial Balance, and Financial Statements

The General Journal and the General Ledger

Adjusting Entries and the Work Sheet

Closing Entries and the Post-Closing Trial Balance

Bank Accounts, Cash Funds, and Internal Controls

Employee Earnings and Deductions

Employer Taxes, Payments, and Reports

Sales and Purchases

Cash Receipts and Cash Payments

Work Sheet and Adjusting Entries

Financial Statements, Closing Entries, and Reversing Entries

Methods of Depreciation

Inventory Methods

Notes Receivablenotes Payable

Filters

Exam 14: Bad Debts

Which of the following results from recording bad debts expense under the allowance method?

The direct write-off method of accounting for bad debts expense is not allowed under GAAP (generally accepted accounting principles).

The allowance method of accounting for bad debts expense is consistent with the accrual basis of accounting as it matches revenues of one year with expenses of the same year.

Allowance for Doubtful Accounts is used under the direct write-off method of accounting for bad debts expense.​

In the allowance method of accounting for bad debts expense, Bad Debts Expense account is debited, and Accounts Receivable is credited when an uncollectible account is written off.

Which of the following accounting equations is used to compute assets?

Which of the following is a disadvantage of the direct write-off method of accounting for bad debts expense?

Which of the following is true of the treatment of bad debts expense in the allowance method of accounting for bad debts?

Which of the following is true about a credit balance in Allowance for Doubtful Accounts at the end of a year?

Upstart Enterprise's total revenue for last year is $300,000, and it estimates 2% of revenue as bad debts. Which of the following journal entries records the bad debts expense under the allowance method?

Which of the following is a similarity between the allowance method and the direct write-off method of accounting for bad debts?

Asset, Liability, Owners Equity, Revenue, and Expense Accounts

T Accounts, Debits and Credits, Trial Balance, and Financial Statements

The General Journal and the General Ledger

Adjusting Entries and the Work Sheet

Closing Entries and the Post-Closing Trial Balance

Bank Accounts, Cash Funds, and Internal Controls

Employee Earnings and Deductions

Employer Taxes, Payments, and Reports

Sales and Purchases

Cash Receipts and Cash Payments

Work Sheet and Adjusting Entries

Financial Statements, Closing Entries, and Reversing Entries

Methods of Depreciation

Inventory Methods

Notes Receivablenotes Payable

Filters

Allowance for Doubtful Accounts is used under the direct write-off method of accounting for bad debts expense.