Deck 9: Receivables

Question 1

The credit department should have no access to cash.

Answer 1

True

Question 2

All of the following duties should be performed by a credit department except:

A)handle cash receipts and payments.
B)review applicant's income and credit history.
C)monitor customer payment records.
D)evaluate customers who apply for credit.

Answer 2

A

Question 3

The allowance for doubtful accounts is a contra account to accounts receivable and has a normal credit balance.

Answer 3

True

Question 4

A record that contains the details by customer or vendor of the individual account balances would be called a:

A)control account.
B)subsidiary ledger.
C)journal.
D)liability account.

Question 5

One method of establishing control over collections of accounts receivable is to:

A)allow no one but the bookkeeper to handle cash.
B)designate an authorized cheque signer.
C)set up a petty cash fund.
D)establish a bank lock box.

Question 6

Receivables are classified as current assets when they are due within two years.

Question 7

Under the allowance method, the recovery of an account previously written off results in an increase in income.

Question 8

Describe two common events that create receivables and provide the generic names of the two parties involved in a credit transaction.

Question 9

Selling on credit creates both a benefit and a cost.

Question 10

Under the allowance method of accounting for uncollectible accounts, the entry to write off an account that is determined to be uncollectible includes a debit to bad-debt expense.

Question 11

A bookkeeper should not be allowed to handle cash.

Question 12

One method of establishing internal control over receivables is to establish a bank lock box.

Question 13

The allowance for doubtful accounts is a contra account to cash.

Question 14

Bad-debt expense is a contra asset account.

Question 15

Under the allowance method, the entry to write off an account that has been deemed uncollectible has an impact on the net income of the firm.

Question 16

The percent-of-sales method for estimating uncollectibles is also known as the income statement approach.

Question 17

The accounts receivable account in the general ledger serves as a control account because it summarizes the total of the receivables from all customers.

Question 18

Which of the following is a benefit of selling on credit?

A)Revenues are increased by making sales to a wider range of customers.
B)Expenses are reduced by making sales to a wide range of customers.
C)Some customers do not pay, creating an expense.
D)Cash is received sooner.

Question 19

Which of the following is included in the category Other receivables?

A)Loans to employees
B)Accounts receivables
C)Notes receivables
D)Investments

Question 20

A critical element of internal control over collections of accounts receivable is:

A)the separation of cash-handling and cash-accounting duties.
B)setting up a petty cash account.
C)using a cheque-writing machine.
D)depositing the cash from the cash register on a daily basis.

Question 21

Aging-of-accounts receivable and percent-of-accounts receivable are both considered income-statement approaches in estimating uncollectible accounts.

Question 22

The balance sheet of Rogers Company reports: accounts receivable (less allowance for doubtful accounts of $25,700), $695,500. Therefore Rogers Company's gross accounts receivable must be $721,200.

Question 23

The current credit balance in allowance for doubtful accounts is $1,150. Management estimates that 2% of net credit sales of $100,000 will be uncollectible. Based on the foregoing data, what is the bad-debt expense balance on the income statement?

A)$2,000
B)$850
C)$3,150
D)$2,850

Question 24

It is normal to have a debit balance in the allowance for doubtful accounts account after adjusting journal entries at the end of the year.

Question 25

The current debit balance in allowance for doubtful accounts is $150. Management estimates that 2% of net credit sales of $100,000 will be uncollectible. Based on the foregoing data, what is the bad-debt expense balance on the income statement?

A)$2,150
B)$1,850
C)$3,150
D)$2,000

Question 26

It is possible to have a debit balance in the allowance for doubtful accounts account before adjusting journal entries at the end of the year.

Question 27

The balance sheet reports accounts receivable at:

A)lower-of-cost-or-market.
B)historical cost.
C)fair value.
D)market value.

Question 28

When using the allowance method, the entry to write off an accounts receivable has no effect on income.

Question 29

Allowance for doubtful accounts has a credit balance of $900 at the end of the current year (prior to adjustment). An analysis of the aged accounts in the customers' ledger indicates uncollectible accounts of $16,000. The adjusting entry would require a debit to:

A)bad-debt expense for $15,100.
B)bad-debt expense for $16,900.
C)allowance for doubtful accounts for $15,100.
D)allowance for doubtful accounts for $16,900.

Question 30

If the allowance method of accounting for doubtful receivables is used, what account is credited in the entry to write off a customer's account as uncollectible?

A)allowance for doubtful accounts
B)accounts receivable
C)bad-debt expense
D)sales returns and allowances

Question 31

Allowance for doubtful accounts has a debit balance of $980 at the end of the current year (prior to adjustment). An analysis of the accounts in the customers' ledger indicates uncollectible accounts of $16,000. The adjusting entry would require a credit to:

A)bad-debt expense for $16,980.
B)allowance for doubtful accounts for $16,980.
C)allowance for doubtful accounts for $15,020.
D)accounts receivable accounts for $15,020.

Question 32

Allowance for doubtful accounts has a debit balance of $980 at the end of the current year (prior to adjustment). Net credit sales for the current period amount to $950,000 and 2.5% is estimated to be uncollectible. The adjusting entry would require a debit to:

A)bad-debt expense for $23,750.
B)allowance for doubtful accounts for $24,730.
C)allowance for doubtful accounts for $22,770.
D)accounts receivable accounts for $23,750.

Question 33

The current credit balance in allowance for doubtful accounts is $150. Management estimates that 2.5% of net credit sales of $105,000 will be uncollectible. Based on the foregoing data, what is the bad-debt expense balance on the income statement?

A)$2,775
B)$2,475
C)$2,650
D)$2,625

Question 34

Allowance for doubtful accounts has a debit balance of $980 at the end of the current year (prior to adjustment). Net credit sales for the current period amount to $900,000 and 2.5% is estimated to be uncollectible. The adjusting entry would require a credit to:

A)bad-debt expense for $23,480.
B)allowance for doubtful accounts for $21,520.
C)allowance for doubtful accounts for $22,500.
D)accounts receivable accounts for $22,500.

Question 35

Under the income-statement approach (percent-of-sales approach), the entry to accrue bad-debt expense involves:

A)a debit to allowance for doubtful accounts and a credit to bad-debt expense.
B)a debit to bad-debt expense and a credit to allowance for doubtful accounts.
C)a debit to bad-debt expense and a credit to accounts receivable.
D)a debit to allowance for doubtful accounts and a credit to accounts receivable.

Question 36

The current debit balance in allowance for doubtful accounts is $465. Management estimates that 3% of net credit sales of $205,000 will be uncollectible. Based on the foregoing data, what is the allowance for doubtful accounts balance on the balance sheet?

A)$6,150
B)$6,615
C)$5,685
D)$465

Question 37

Accounts receivable may be presented on the balance sheet without the contra account: allowance for doubtful accounts.

Question 38

Mandy Smith's account was written off last year. She owed City Company $5,000. Using the allowance method, the journal entry to reinstate her account involves:

A)a debit to Smith's account receivable and a credit to bad-debt expense.
B)a debit to allowance for doubtful accounts and a credit to Smith's account receivable.
C)a debit to bad-debt expense and a credit to Smith's account receivable.
D)a debit to Smith's account receivable and a credit to allowance for doubtful accounts.

Question 39

Mandy Smith's account was written off last year. She owed City Company $5,000. Using the allowance method, the journal entry to receive the cash after her account has been reinstated involves:

A)a debit to cash and a credit to Smith's account receivable.
B)a debit to allowance for doubtful accounts and a credit to Smith's account receivable.
C)a debit to cash and a credit to bad-debt expense.
D)a debit to Smith's account receivable and a credit to allowance for doubtful accounts.

Question 40

You are informed that Warren Hodges, one of your customers, has declared bankruptcy. Hodges has an account with your company with a current balance of $2,300. Using the allowance method, the entry to write off the uncollectible account involves:

A)a debit to allowance for doubtful accounts and a credit to the Hodges's account receivable.
B)a debit to Hodges's account receivable and a credit to bad-debt expense.
C)a debit to bad-debt expense and a credit to Hodges's account receivable.
D)a debit to Hodges's account receivable and a credit to allowance for doubtful accounts.

Question 41

Table 9-5
The Ritchie Company gathered the following information pertaining to its year ended December 31, 2019, prior to any adjustments:
$$\begin{array} { | l | r | r | } \hline \text { Net credit sales for the year } & \$ 780,000 & \\\hline \text { Accounts receivable, Dec. } 31,2019 & 170,000 & \\\hline \text { Allowance for doubtful accounts, } & & \\\text { December } 31,2019 & 3,200 & \mathrm { Cr } . \\\hline & & \\\hline\end{array}$$ Aging of accounts receivable at December 31, 2019:
$$\begin{array} { | l | r | } \hline 1 - 30 \text { days } & \$ 95,000 \\\hline 31 - 60 \text { days } & 38,000 \\\hline 61 - 90 \text { days } & 23,000 \\\hline \text { Over } 90 \text { days } & 14,000 \\\hline \text { Total } & \$ 170,000 \\\hline\end{array}$$

-Refer to Table 9-5. Assume Ritchie uses the aging-of-accounts-receivable method for estimating uncollectible accounts. Ritchie estimates that uncollectible accounts will be aged as follows: 3% for 1-30 days; 5% for 31-60 days; 8% for 61-90 days; and 20% for over 90 days. The adjusting entry to record bad-debt expense for the year is:

A) $\begin{array} { | c | r | r | } \hline \text { Bad-Debt Expense } & 12,590 & \\\hline \text { Accounts Receivable } & & 12,590 \\\hline\end{array}$
B) $\begin{array} { | c | r | r | } \hline \text { Bad-Debt Expense } & 6,190 & \\\hline \text { Allow. for Doubtful Accts. } & & 6,190 \\\hline\end{array}$
C) $\begin{array} { | r | r | r | } \hline \text { Allow. for Doubtful Accts. } & 6,190 & \\\hline \text { Bad-Debt Expense } & & 6,190 \\\hline\end{array}$
D) $\begin{array} { | c | r | r | } \hline \text { Bad-Debt Expense } & 9,390 & \\\hline \text { Allow. for Doubtful Accts. } & & 9,390 \\\hline\end{array}$

Question 42

Table 9-5
The Ritchie Company gathered the following information pertaining to its year ended December 31, 2019, prior to any adjustments:
$$\begin{array} { | l | r | r | } \hline \text { Net credit sales for the year } & \$ 780,000 & \\\hline \text { Accounts receivable, Dec. } 31,2019 & 170,000 & \\\hline \text { Allowance for doubtful accounts, } & & \\\text { December } 31,2019 & 3,200 & \mathrm { Cr } . \\\hline & & \\\hline\end{array}$$ Aging of accounts receivable at December 31, 2019:
$$\begin{array} { | l | r | } \hline 1 - 30 \text { days } & \$ 95,000 \\\hline 31 - 60 \text { days } & 38,000 \\\hline 61 - 90 \text { days } & 23,000 \\\hline \text { Over } 90 \text { days } & 14,000 \\\hline \text { Total } & \$ 170,000 \\\hline\end{array}$$

-Refer to Table 9-5. Assume Ritchie uses the percent-of-sales method for estimating uncollectible accounts. Ritchie estimates that bad-debt expense will be 0.6% of net credit sales. The balance in allowance for doubtful accounts after the adjusting entry for uncollectible accounts will be:

A)$7,880.
B)$4,680.
C)$1,480.
D)$3,200.

Question 43

Table 9-5
The Ritchie Company gathered the following information pertaining to its year ended December 31, 2019, prior to any adjustments:
$$\begin{array} { | l | r | r | } \hline \text { Net credit sales for the year } & \$ 780,000 & \\\hline \text { Accounts receivable, Dec. } 31,2019 & 170,000 & \\\hline \text { Allowance for doubtful accounts, } & & \\\text { December } 31,2019 & 3,200 & \mathrm { Cr } . \\\hline & & \\\hline\end{array}$$ Aging of accounts receivable at December 31, 2019:
$$\begin{array} { | l | r | } \hline 1 - 30 \text { days } & \$ 95,000 \\\hline 31 - 60 \text { days } & 38,000 \\\hline 61 - 90 \text { days } & 23,000 \\\hline \text { Over } 90 \text { days } & 14,000 \\\hline \text { Total } & \$ 170,000 \\\hline\end{array}$$

-Refer to Table 9-5. Assume Ritchie uses the aging-of-accounts-receivable method for estimating uncollectible accounts. Ritchie estimates that bad-debt expense will be aged as follows: 2.5% for 1-30 days; 4.5% for 31-60 days; 7.5% for 61-90 days; and 22.5% for over 90 days. After the adjustment for uncollectible accounts is made, the net realizable value of the accounts receivable will be:

A)$157,840.
B)$161,040.
C)$170,000.
D)$164,240.

Question 44

Under the allowance method, if uncollectible account write-offs during the year exceed the allowance amount, the balance in allowance for doubtful accounts at year end prior to adjustment:

A)will be zero.
B)should be deducted from accounts receivable.
C)will be a debit.
D)should be adjusted by debiting it to bring the balance back to zero.

Question 45

Lester Company uses the allowance method and estimates its bad-debt expense based on aging the receivables. Before the adjusting entry, the allowance for doubtful accounts had a $425 debit balance. Based on aged receivables, Lester estimates that $3,700 will probably prove uncollectible. What is the amount of the adjusting journal entry that Lester should make?

A)$3,700
B)$3,275
C)$4,125
D)$425

Question 46

Accounts receivable has a debit balance of $5,000, and the allowance for doubtful accounts has a credit balance of $440. A specific account of $160 is written off. What is the amount of net receivables after the write-off?

A)$4,840
B)$4,400
C)$4,560
D)$5,000

Question 47

The current credit balance in allowance for doubtful accounts before adjustment is $658. An aging schedule reveals $3,500 of uncollectible accounts. The ending balance in allowance for doubtful accounts should be:

A)$3,500.
B)$2,842.
C)$4,158.
D)$658.

Question 48

Table 9-1
Ringo Company had the following information relating to net credit sales for 2019:
$$\begin{array} { | c | r | c | } \hline \text { Accounts receivable, Jan. 1, 2019 } & \$ 18,000 & \text { Dr. } \\\hline \text { Allowance for doubtful accounts, } & & \\\text { Dec. 31, 2019, prior to adjustment } & 600 & \mathrm { Cr } . \\\hline \text { Net credit sales during 2019 } & 95,000 & \\\hline \text { Collections on account during 2019 } & 87,000 & \\\hline \text { Cash sales during } 2019 & 27,000 & \\\hline\end{array}$$

-Referring to Table 9-1, if uncollectible accounts are determined by the percent-of-sales method to be 3% of net credit sales, the bad-debt expense for 2019 would be:

A)$2,850.
B)$3,450.
C)$2,250.
D)$600.

Question 49

The allowance for doubtful accounts has a current debit balance of $2,550. Bad-debt expense is estimated to be 3% of net credit sales. If net credit sales were $250,000, which of the following would be part of the adjusting entry for bad-debt expense?

A)Debit allowance for doubtful accounts for $7,500.
B)Credit allowance for doubtful accounts for $4,950.
C)Debit bad-debt expense for $7,500.
D)Debit bad-debt expense for $10,050.

Question 50

Table 9-5
The Ritchie Company gathered the following information pertaining to its year ended December 31, 2019, prior to any adjustments:
$$\begin{array} { | l | r | r | } \hline \text { Net credit sales for the year } & \$ 780,000 & \\\hline \text { Accounts receivable, Dec. } 31,2019 & 170,000 & \\\hline \text { Allowance for doubtful accounts, } & & \\\text { December } 31,2019 & 3,200 & \mathrm { Cr } . \\\hline & & \\\hline\end{array}$$ Aging of accounts receivable at December 31, 2019:
$$\begin{array} { | l | r | } \hline 1 - 30 \text { days } & \$ 95,000 \\\hline 31 - 60 \text { days } & 38,000 \\\hline 61 - 90 \text { days } & 23,000 \\\hline \text { Over } 90 \text { days } & 14,000 \\\hline \text { Total } & \$ 170,000 \\\hline\end{array}$$

-Refer to Table 9-5. Assume Ritchie uses the aging-of-accounts-receivable method for estimating uncollectible accounts. Ritchie estimates that uncollectible accounts will be aged as follows: 2% for 1-30 days; 4% for 31-60 days; 10% for 61-90 days; and 25% for over 90 days. The balance in allowance for doubtful accounts after the adjusting entry for uncollectible accounts will be:

A)$12,280.
B)$6,000.
C)$5,880.
D)$9,220.

Question 51

Table 9-5
The Ritchie Company gathered the following information pertaining to its year ended December 31, 2019, prior to any adjustments:
$$\begin{array} { | l | r | r | } \hline \text { Net credit sales for the year } & \$ 780,000 & \\\hline \text { Accounts receivable, Dec. } 31,2019 & 170,000 & \\\hline \text { Allowance for doubtful accounts, } & & \\\text { December } 31,2019 & 3,200 & \mathrm { Cr } . \\\hline & & \\\hline\end{array}$$ Aging of accounts receivable at December 31, 2019:
$$\begin{array} { | l | r | } \hline 1 - 30 \text { days } & \$ 95,000 \\\hline 31 - 60 \text { days } & 38,000 \\\hline 61 - 90 \text { days } & 23,000 \\\hline \text { Over } 90 \text { days } & 14,000 \\\hline \text { Total } & \$ 170,000 \\\hline\end{array}$$

-Refer to Table 9-5. Assume Ritchie uses the percent-of-sales method for estimating uncollectible accounts. Ritchie estimates that bad-debt expense will be 1.3% of net credit sales. After the adjustment for uncollectible accounts is made, the net realizable value of accounts receivable will be:

A)$156,660.
B)$170,000.
C)$159,860.
D)$163,060.

Question 52

When a note matures, the payee should record:

A)unearned revenue.
B)interest revenue.
C)interest expense.
D)note expense.

Question 53

Fresh Dairy Company uses the allowance method and estimates uncollectible accounts based on a percent of sales. Net credit sales represent 75% of total sales. Total sales for 2019 were $840,000. Historically, 1/2 of 1% of net credit sales have been uncollectible. At December 31, 2019, the balance in allowance for doubtful accounts is a $120 credit. What is the balance in bad-debt expense after the adjusting entry is made?

A)$3,030
B)$4,200
C)$3,150
D)$3,270

Question 54

Eyewear Unlimited has accounts receivable of $16,000 and an allowance for doubtful accounts with a credit balance of $1,700 before a specific account of $60 is written off. What were net accounts receivable before and after the write-off?

A) $\begin{array} { | c | c | } \hline \text { Before } & \text { After } \\\hline \$ 16,000 & \$ 14,240 \\\hline\end{array}$
B) $\begin{array} { | c | c | } \hline \text { Before } & \text { After } \\\hline \$ 16,000 & \$ 16,000 \\\hline\end{array}$
C) $\begin{array} { | c | c | } \hline \text { Before } & \text { After } \\\hline \$ 14,300 & \$ 14,240 \\\hline\end{array}$
D) $\begin{array} { | c | c | } \hline \text { Before } & \text { After } \\\hline \$ 14,300 & \$ 14,300 \\\hline\end{array}$

Question 55

The current credit balance in allowance for doubtful accounts before adjustment is $658. An aging schedule reveals $3,500 of uncollectible accounts. The journal entry for estimated uncollectible accounts should be prepared for:

A)$658.
B)$3,500.
C)$4,158.
D)$2,842.

Question 56

Using the balance-sheet approach to estimate uncollectibles, accounts that are 90 days old are:

A)more likely to be collected than accounts 30 days old.
B)equally likely to be collected as accounts 360 days old.
C)less likely to be collected than accounts 30 days old.
D)less likely to be collected than accounts 360 days old.

Question 57

Table 9-5
The Ritchie Company gathered the following information pertaining to its year ended December 31, 2019, prior to any adjustments:
$$\begin{array} { | l | r | r | } \hline \text { Net credit sales for the year } & \$ 780,000 & \\\hline \text { Accounts receivable, Dec. } 31,2019 & 170,000 & \\\hline \text { Allowance for doubtful accounts, } & & \\\text { December } 31,2019 & 3,200 & \mathrm { Cr } . \\\hline & & \\\hline\end{array}$$ Aging of accounts receivable at December 31, 2019:
$$\begin{array} { | l | r | } \hline 1 - 30 \text { days } & \$ 95,000 \\\hline 31 - 60 \text { days } & 38,000 \\\hline 61 - 90 \text { days } & 23,000 \\\hline \text { Over } 90 \text { days } & 14,000 \\\hline \text { Total } & \$ 170,000 \\\hline\end{array}$$

-Referring to Table 9-5, assume Ritchie uses the percent-of-sales method for estimating uncollectible accounts. Ritchie estimates that uncollectible accounts will be 1.75% of net credit sales. The adjusting entry to record bad-debt expense for the year is:

A) $\begin{array} { | c | r | r | } \hline \text { Bad-Debt Expense } & 13,650 & \\\hline \text { Accounts Receivable } & & 13,650 \\\hline\end{array}$
B) $\begin{array} { | c | r | r | } \hline \text { Bad-Debt Expense } & 10,450 & \\\hline \text { Accounts Receivable } & & 10,450 \\\hline\end{array}$
C) $\begin{array} { | c | r | r | } \hline \text { Bad-Debt Expense } & 16,850 & \\\hline \text { Allow. for Doubtful Accts. } & & 16,850 \\\hline\end{array}$
D) $\begin{array} { | c | r | r | } \hline \text { Bad-Debt Expense } & 13,650 & \\\hline \text { Allow. for Doubtful Accts. } & & 13,650 \\\hline\end{array}$

Question 58

Table 9-1
Ringo Company had the following information relating to net credit sales for 2019:
$$\begin{array} { | c | r | c | } \hline \text { Accounts receivable, Jan. 1, 2019 } & \$ 18,000 & \text { Dr. } \\\hline \text { Allowance for doubtful accounts, } & & \\\text { Dec. 31, 2019, prior to adjustment } & 600 & \mathrm { Cr } . \\\hline \text { Net credit sales during 2019 } & 95,000 & \\\hline \text { Collections on account during 2019 } & 87,000 & \\\hline \text { Cash sales during } 2019 & 27,000 & \\\hline\end{array}$$

-Referring to Table 9-1, if uncollectible accounts are determined by the aging of receivables method to be $3,040, the bad-debt expense for 2019 would be:

A)$3,640.
B)$2,440.
C)$3,040.
D)$600.

Question 59

Sports Shop reports net accounts receivables on its December 31, 2019, balance sheet at $105,460. The allowance for doubtful accounts has a normal balance of $3,200 after adjustment. What is the ending balance in the accounts receivable account?

A)$102,260
B)$105,460
C)$108,660
D)$99,060

Question 60

Table 9-1
Ringo Company had the following information relating to net credit sales for 2019:
$$\begin{array} { | c | r | c | } \hline \text { Accounts receivable, Jan. 1, 2019 } & \$ 18,000 & \text { Dr. } \\\hline \text { Allowance for doubtful accounts, } & & \\\text { Dec. 31, 2019, prior to adjustment } & 600 & \mathrm { Cr } . \\\hline \text { Net credit sales during 2019 } & 95,000 & \\\hline \text { Collections on account during 2019 } & 87,000 & \\\hline \text { Cash sales during } 2019 & 27,000 & \\\hline\end{array}$$

-Referring to Table 9-1, if uncollectible accounts are determined by the aging of receivables to be $3,450, the amount of net accounts receivable after adjusting entries for 2019 would be:

A)$13,950.
B)$15,150.
C)$17,400.
D)$22,550.

Question 61

Table 9-11 Mark's Sales
At the beginning of 2019, Mark's sales had the following ledger balances:
$$\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Accounts Receivable } & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & 24,000 \text { Dr. } \\\hline & & & & \\\hline\end{array}$$ $$\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \begin{array} { c } \text { Allowance for } \\\text { Doubtful Accounts }\end{array} & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & 1,000 \mathrm { Cr } \text {. } \\\hline & & & & \\\hline\end{array}$$ $$\begin{array} { | l | l | l | l | l | } \hline \text { Date } & \text { Bad Debts Expense } & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & \\\hline & & & & \\\hline\end{array}$$ During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700
of write-offs.

-Refer to Table 9-11. At the end of the year, Mark's adjusted for uncollectible account expense using the percent-of-sales method, and applied a rate, based on past history, of 1.2%. At the end of the year, what was the balance in the bad debts expense?

A)$2,300
B)$5,400
C)$6,400
D)$2,700

Question 62

Table 9-10 Armadillo Camera Shop
The following information is from the 2019 records of Armadillo Camera Shop:
$$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31,2019 } & \$ 20,000 \text { (debit) } \\\hline \text { Allowance for doubtful accounts, December } & \\31,2019 , \text { prior to adjustment } & 600 ( \text { debit) } \\\hline \text { Net credit sales for 2019 } & 95,000 \\\hline \text { Accounts written off as uncollectible } & \\ \text { during 2019 } &7,000 \\\hline \text { Cash sales during 2019 } & \text { } 27,000 \\\hline\end{array}$$

-Refer to Table 9-10. Bad debts expense is estimated by the percent-of-sales method. Management estimates that 3% of net credit sales will be uncollectible. Which of the following will be the balance of the allowance for uncollectible accounts after adjustment?

A)$7,000
B)$3,450
C)$2,850
D)$2,250

Question 63

Table 9-11 Mark's Sales
At the beginning of 2019, Mark's sales had the following ledger balances:
$$\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Accounts Receivable } & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & 24,000 \text { Dr. } \\\hline & & & & \\\hline\end{array}$$ $$\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \begin{array} { c } \text { Allowance for } \\\text { Doubtful Accounts }\end{array} & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & 1,000 \mathrm { Cr } \text {. } \\\hline & & & & \\\hline\end{array}$$ $$\begin{array} { | l | l | l | l | l | } \hline \text { Date } & \text { Bad Debts Expense } & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & \\\hline & & & & \\\hline\end{array}$$ During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700
of write-offs.

-Refer to Table 9-11. At the end of the year, Mark's adjusted for uncollectible account expense using the aging method, and calculated an amount of $1,600 as their estimate of uncollectible accounts. At the end of the year, what was the balance in the uncollectible account expense?

A)$2,300
B)$5,400
C)$4,300
D)$2,700

Question 64

Table 9-11 Mark's Sales
At the beginning of 2019, Mark's sales had the following ledger balances:
$$\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Accounts Receivable } & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & 24,000 \text { Dr. } \\\hline & & & & \\\hline\end{array}$$ $$\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \begin{array} { c } \text { Allowance for } \\\text { Doubtful Accounts }\end{array} & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & 1,000 \mathrm { Cr } \text {. } \\\hline & & & & \\\hline\end{array}$$ $$\begin{array} { | l | l | l | l | l | } \hline \text { Date } & \text { Bad Debts Expense } & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & \\\hline & & & & \\\hline\end{array}$$ During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700
of write-offs.

-Refer to Table 9-11. At the end of the year, Mark's adjusted for uncollectible account expense using the percent-of-sales method, and applied a rate, based on past history, of 1.2%. At the end of the year, what was the balance in the allowance account?

A)$2,300
B)$1,700
C)$6,400
D)$2,700

Question 65

Table 9-10 Armadillo Camera Shop
The following information is from the 2019 records of Armadillo Camera Shop:
$$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31,2019 } & \$ 20,000 \text { (debit) } \\\hline \text { Allowance for doubtful accounts, December } & \\31,2019 , \text { prior to adjustment } & 600 ( \text { debit) } \\\hline \text { Net credit sales for 2019 } & 95,000 \\\hline \text { Accounts written off as uncollectible } & \\ \text { during 2019 } &7,000 \\\hline \text { Cash sales during 2019 } & \text { } 27,000 \\\hline\end{array}$$

-Refer to Table 9-10. Bad debts expense is estimated by the aging-of-accounts-receivable method. Management estimates that $2,850 of accounts receivable will be uncollectible. Which of the following will be the amount of bad debts expense?

A)$7,000
B)$2,250
C)$3,450
D)$2,850

Question 66

Table 9-11 Mark's Sales
At the beginning of 2019, Mark's sales had the following ledger balances:
$$\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Accounts Receivable } & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & 24,000 \text { Dr. } \\\hline & & & & \\\hline\end{array}$$ $$\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \begin{array} { c } \text { Allowance for } \\\text { Doubtful Accounts }\end{array} & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & 1,000 \mathrm { Cr } \text {. } \\\hline & & & & \\\hline\end{array}$$ $$\begin{array} { | l | l | l | l | l | } \hline \text { Date } & \text { Bad Debts Expense } & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & \\\hline & & & & \\\hline\end{array}$$ During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700
of write-offs.

-Refer to Table 9-11. At the end of the year, Mark's adjusted for uncollectible account expense using the aging method, and calculated an amount of $1,600 as their estimate of uncollectible accounts. At the end of the year, what was the balance in the allowance account?

A)$1,600
B)$1,700
C)$6,400
D)$2,700

Question 67

Table 9-10 Armadillo Camera Shop
The following information is from the 2019 records of Armadillo Camera Shop:
$$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31,2019 } & \$ 20,000 \text { (debit) } \\\hline \text { Allowance for doubtful accounts, December } & \\31,2019 , \text { prior to adjustment } & 600 ( \text { debit) } \\\hline \text { Net credit sales for 2019 } & 95,000 \\\hline \text { Accounts written off as uncollectible } & \\ \text { during 2019 } &7,000 \\\hline \text { Cash sales during 2019 } & \text { } 27,000 \\\hline\end{array}$$

-Refer to Table 9-10. Bad debts expense is estimated by the aging-of-accounts-receivable method. Management estimates that $2,850 of accounts receivable will be uncollectible. Which of the following will be the balance of the allowance for uncollectible accounts after adjustment?

A)$2,850
B)$3,450
C)$7,000
D)$2,250

Question 68

Record entries for the following transactions for Riviera Company. Riviera Company maintains an allowance account.
a)Sold merchandise on account to Carver Company, $2,800.
b)Sold merchandise on account to Gwinett Company, $1,670.
c)Write off both the Carver Company and the Gwinett Company accounts.
d)Carver Company unexpectedly paid off its account in full.

Question 69

Prepare journal entries for the following independent situations.
a)The allowance for doubtful accounts has a $525 debit balance prior to adjustment. An aging schedule prepared on December 31 reveals uncollectible accounts of $7,600.
b)The allowance for doubtful accounts has a $500 credit balance prior to adjustment. An aging schedule prepared on December 31 reveals uncollectible accounts of $7,800.
c)The allowance for doubtful accounts has a $700 credit balance prior to adjustment. Net credit sales during the year are $260,000 and 4% are estimated to be uncollectible.
d)The allowance for doubtful accounts has a $800 credit balance prior to adjustment. Net credit sales during the year are $270,000 and 3.5% are estimated to be uncollectible receivable.

Question 70

Based on liquidity, which item would appear after accounts receivable in the Current Asset section of the Balance Sheet?

A)inventory
B)cash
C)short-term (marketable)investments
D)Property, Plant, and Equipment

Question 71

Compute the ending balance in the allowance for doubtful accounts after the adjusting entries have been prepared for the following independent situations.
a)Credit balance in allowance for doubtful accounts is $500 before adjustment. An aging schedule indicates $3,500 of accounts receivables are uncollectible.
b)Debit balance in allowance for doubtful accounts is $700 before adjustment. An aging schedule indicates $4,300 of accounts receivables are uncollectible.
c)Credit balance in allowance for doubtful accounts is $500 before adjustment. Net credit sales for the current year are $325,000 and 1% is considered uncollectible.
d)Debit balance in allowance for doubtful accounts is $700 before adjustment. Net credit sales for the current year are $350,000 and 1.25% is considered uncollectible.

Question 72

Table 9-10 Armadillo Camera Shop
The following information is from the 2019 records of Armadillo Camera Shop:
$$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31,2019 } & \$ 20,000 \text { (debit) } \\\hline \text { Allowance for doubtful accounts, December } & \\31,2019 , \text { prior to adjustment } & 600 ( \text { debit) } \\\hline \text { Net credit sales for 2019 } & 95,000 \\\hline \text { Accounts written off as uncollectible } & \\ \text { during 2019 } &7,000 \\\hline \text { Cash sales during 2019 } & \text { } 27,000 \\\hline\end{array}$$

-Refer to Table 9-10. Bad debts expense is estimated by the percent-of-sales method. Management estimates that 3% of net credit sales will be uncollectible. Which of the following will be the amount of bad debts expense?

A)$7,000
B)$3,450
C)$2,250
D)$2,850

Question 73

On December 31, 2019, Rainbow Appliances has $275,000 in accounts receivable and an allowance account with a debit balance of $320. Current period net credit sales were $780,000, and cash sales were $68,000.
a)Rainbow Appliances performs an aging schedule, and the results are summarized below, along with the appropriate percentages that Rainbow applies to the categories shown. Assuming Rainbow uses the aging approach of accounting for uncollectible accounts, prepare the adjusting entry required at the end of the accounting period.
b)Assume now Rainbow uses the percent-of-sales method of accounting for uncollectible accounts. If historical data indicate that approximately 3% of net credit sales are uncollectible, what is the amount of bad-debt expense and what is the balance in the allowance for doubtful accounts after adjustment?

Question 74

Table 9-11 Mark's Sales
At the beginning of 2019, Mark's sales had the following ledger balances:
$$\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Accounts Receivable } & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & 24,000 \text { Dr. } \\\hline & & & & \\\hline\end{array}$$ $$\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \begin{array} { c } \text { Allowance for } \\\text { Doubtful Accounts }\end{array} & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & 1,000 \mathrm { Cr } \text {. } \\\hline & & & & \\\hline\end{array}$$ $$\begin{array} { | l | l | l | l | l | } \hline \text { Date } & \text { Bad Debts Expense } & \text { Debit } & \text { Credit } & \text { Balance } \\\hline & & & & \\\hline & & & & \\\hline\end{array}$$ During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700
of write-offs.

-Refer to Table 9-11. At the end of the year, Mark's adjusted for uncollectible account expense using the percent-of-sales method, and applied a rate, based on past history, of 1.2%. At the end of the year, what was the balance in the accounts receivable?

A)$10,300
B)$3,700
C)$14,000
D)$21,300

Question 75

Which of the following entries would be used to account for uncollectible receivables using the allowance method?

A)Allowance for uncollectible accounts is debited and Bad debts expense is credited.
B)Bad debts expense is debited and Allowance for uncollectible accounts is credited.
C)Bad debts expense is debited and Accounts receivable is credited.
D)Accounts receivable is debited and Bad debts expense is credited.

Question 76

Table 9-10 Armadillo Camera Shop
The following information is from the 2019 records of Armadillo Camera Shop:
$$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31,2019 } & \$ 20,000 \text { (debit) } \\\hline \text { Allowance for doubtful accounts, December } & \\31,2019 , \text { prior to adjustment } & 600 ( \text { debit) } \\\hline \text { Net credit sales for 2019 } & 95,000 \\\hline \text { Accounts written off as uncollectible } & \\ \text { during 2019 } &7,000 \\\hline \text { Cash sales during 2019 } & \text { } 27,000 \\\hline\end{array}$$

-Refer to Table 9-10. Bad debts expense is estimated by the percent-of-sales method. Management estimates that 3% of net credit sales will be uncollectible. Which of the following will be the amount of net accounts receivable after adjustment?

A)$16,550
B)$17,750
C)$17,150
D)$13,000

Question 77

State the effect on net income of each of the following independent transactions. State your answer as: increase, decrease, or no effect.

Question 78

Munich Company's total sales for the year amounted to $100,000, of which 60 percent was on credit. The unadjusted trial balance showed accounts receivable of $20,000, and the allowance for doubtful accounts reflected a $800 credit balance (before the write-off of a bad account of $500). Munich uses 3% of accounts receivable as an estimate of bad-debt expense. Calculate the bad-debt expense for the year for Munich Company.

Question 79

Compute net accounts receivable for the following independent situations.
a)Accounts receivable has a balance of $16,000. The allowance for doubtful accounts has a credit balance prior to adjustment of $350. An aging schedule prepared on December 31 reveals $1,250 of uncollectible accounts.
b)Accounts receivable has a balance of $17,500. The allowance for doubtful accounts has a debit balance prior to adjustment of $560. An aging schedule prepared on December 31 reveals $1,500 of uncollectible accounts.
c)Accounts receivable has a balance of $15,500. The allowance for doubtful accounts has a debit balance prior to adjustment of $760. Net credit sales for the year are $35,000 and 3.5% of net credit sales are deemed uncollectible.
d)Accounts receivable has a balance of $20,200. The allowance for doubtful accounts has a credit balance prior to adjustment of $460. Net credit sales for the year are $35,000 and 4.5% of net credit sales are deemed uncollectible.

Question 80

On December 31, 2019, the unadjusted trial balance of Tarzwell Services showed the following balances: The business has given up trying to collect $5,000 of its accounts receivable but has not yet recorded the write-off entry. The firm uses the allowance method to estimate bad-debt expense.
a)Provide the entry for the write-off.
b)If the firm uses the percent-of-sales allowance method for recording bad-debt expense, and has experienced an average 6% rate of non-collection based on sales, provide the entry to record bad-debt expense for 2019.
c)Assume that after the firm recorded the $5,000 of write-offs, it determined that 18% of its remaining accounts receivable will be uncollectible under the aging method. Provide the entry to record bad-debt expense.