Deck 8: Accounting for Receivables

Question 1

The direct write-off method of accounting for doubtful accounts mismatches revenue and expenses and overstates assets.

Answer 1

True

Question 2

The direct write-off method of accounting for doubtful accounts follows the accrual concept of accounting more closely than does the allowance method of accounting for doubtful accounts.

Answer 2

False

Question 3

The Allowance for Doubtful Accounts normally has a credit balance.

Answer 3

True

Question 4

If the allowance method of recording doubtful accounts is used, the entry to write off an account does not affect net income or total assets.

Question 5

Interest at a rate of 8% on $9,000 for 120 days equals $240.

Question 6

At what amount will accounts receivable for Advantage Company be reported on the balance sheet if the gross receivable balance is $52,000 and the allowance for doubtful accounts is estimated at 4% of gross receivables?

A) $52,960
B) $47,000
C) $49,920
D) $28,200

Question 7

At what amount will accounts receivable for Horizon Company be reported on the balance sheet if the gross receivable balance is $156,000 and the allowance for doubtful accounts is estimated at 4% of gross receivables?

A) $158,880
B) $141,000
C) $149,760
D) $ 84,600

Question 8

Great Landscapes Company estimates its doubtful accounts by aging its accounts receivable and applying percentages to various aged categories of accounts. The Great Landscapes Company computes a total of $3,600 in estimated doubtful accounts as of December 31, 2019. Its Accounts Receivable account has a balance of $112,800 and its Allowance for Doubtful Accounts has a credit balance of $600 before adjustment at December 31, 2019.
How much bad debts expense will Great Escapes report in 2019?

A) $ 480
B) $3,840
C) $3,000
D) $3,360

Question 9

Green Garden Company estimates its doubtful accounts by aging its accounts receivable and applying percentages to various aged categories of accounts. The Green Garden Company computes a total of $10,800 in estimated doubtful accounts as of December 31, 2019. Its Accounts Receivable account has a balance of $338,400 and its Allowance for Doubtful Accounts has a credit balance of $1,800 before adjustment at December 31, 2019.
How much bad debts expense will Green Garden report in 2019?

A) $ 1,440
B) $11,520
C) $ 9,000
D) $10,080

Question 10

A major shortcoming of the direct write-off method is that credit losses are:

A) Not matched with sales
B) Never recognized
C) Not shown in the subsidiary ledger
D) Sometimes collected at a future date

Question 11

In accounting for credit losses:

A) The allowance method matches losses with related sales better than the direct write-off method.
B) The direct write-off method involves estimating credit losses.
C) The direct write-off method consistently understates assets on the balance sheet.
D) Both (B) and (C)

Question 12

On December 31, 2019 before adjusting entries, Accounts Receivable for California Company had a debit balance of $200,000, and the Allowance for Doubtful Accounts had a credit balance of $6,000. Credit sales for the year were $1,600,000.
If credit losses are estimated at 1% of credit sales:

A) The balance of the Allowance for Doubtful Accounts will be $10,000 after adjustment.
B) The balance of the Allowance for Doubtful Accounts will be $22,000 after adjustment.
C) The balance of the Allowance for Doubtful Accounts will be $16,000 after adjustment.
D) Bad Debts Expense for the year will be $22,000.

Question 13

On December 31, 2019 before adjusting entries, Accounts Receivable for Atlanta Company had a debit balance of $600,000, and the Allowance for Doubtful Accounts had a credit balance of $18,000. Credit sales for the year were $4,800,000.
If credit losses are estimated at 1% of credit sales:

A) The balance of the Allowance for Doubtful Accounts will be $30,000 after adjustment.
B) The balance of the Allowance for Doubtful Accounts will be $66,000 after adjustment.
C) The balance of the Allowance for Doubtful Accounts will be $48,000 after adjustment.
D) Bad Debts Expense for the year will be $66,000.

Question 14

Under the allowance method of accounting for credit losses, the entry to write off a specific account:

A) Will increase total assets
B) Debits Bad Debts Expense and credits Allowance for Doubtful Accounts
C) Is the same as the entry to write off a specific account under the direct write-off method
D) Does not affect net income or total assets

Question 15

Boulder Beaver Company had a $150,000 beginning balance in Accounts Receivable and a $6,000 credit balance in the Allowance for Doubtful Accounts. During the year, credit sales were $600,000 and customers' accounts collected were $590,000. Also, $4,000 in worthless accounts were written off.
What was the net amount of receivables included in the current assets at the end of the year, before any provision was made for doubtful accounts?

A) $130,000
B) $126,000
C) $154,000
D) $120,000

Question 16

John Den Bear Company had a $450,000 beginning balance in Accounts Receivable and a $18,000 credit balance in the Allowance for Doubtful Accounts. During the year, credit sales were $1,800,000 and customers' accounts collected were $1,770,000. Also, $12,000 in worthless accounts were written off.
What was the net amount of receivables included in the current assets at the end of the year, before any provision was made for doubtful accounts?

A) $390,000
B) $378,000
C) $462,000
D) $240,000

Question 17

The entry to record the write-off of Ward Company's account under the direct write-off method is:

A) Accounts Receivable--Ward Company
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts
B) Bad Debts Expense
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts
C) Allowance for Doubtful Accounts
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable--Ward Company
D) Bad Debts Expense
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable--Ward Company

Question 18

The entry to record the write-off of Sepich, Inc.'s account using the allowance method is:

A) Bad Debts Expense
$\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts
B) Bad Debts Expense
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable--Sepich, Inc.
C) Allowance for Doubtful Accounts
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable--Sepich, Inc.
D) Accounts Receivable--Sepich, Inc.
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts

Question 19

Assume the following unadjusted account balances at the end of the accounting period for Margarete Company: Accounts Receivable, $100,000; Allowance for Doubtful Accounts, $1,400 (debit balance); and Net sales, $1,200,000.
If Margarete's past experience indicates credit losses of 1% of net sales, the adjusting entry to estimate doubtful accounts is:

A) Bad Debts Expense 12,000
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable 12,000
B) Bad Debts Expense 10,600
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 10,600
C) Bad Debts Expense 13,400
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 13,400
D) Bad Debts Expense 12,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 12,000

Question 20

Assume the following unadjusted account balances at the end of the accounting period for Emmie Company: Accounts Receivable, $300,000; Allowance for Doubtful Accounts, $4,200 (debit balance); and Net sales, $3,600,000.
If Emmie's past experience indicates credit losses of 1% of net sales, the adjusting entry to estimate doubtful accounts is:

A) Bad Debts Expense 36,000
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable 36,000
B) Bad Debts Expense 31,800
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 31,800
C) Bad Debts Expense 40,200
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 40,200
D) Bad Debts Expense 36,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 36,000

Question 21

River Forest, Inc.'s $180,000 Accounts Receivable balance at December 31 consisted of $160,000 current balances and $20,000 past-due balances. At December 31, the Allowance for Doubtful Accounts had a credit balance of $1,600. River Forest estimated that 2% of current balances and 15% of past-due balances will prove uncollectible.
The adjusting entry to record credit losses is:

A) Bad Debts Expense 5,800
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 5,800
B) Bad Debts Expense 4,600
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 4,600
C) Bad Debts Expense 4,200
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable 4,200
D) Bad Debts Expense 7,400
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 7,400

Question 22

Hockey, Inc.'s $540,000 Accounts Receivable balance at December 31 consisted of $480,000 current balances and $60,000 past-due balances. At December 31, the Allowance for Doubtful Accounts had a credit balance of $4,800. Hockey, Inc. estimated that 2% of current balances and 15% of past-due balances will prove uncollectible.
The adjusting entry to record credit losses is:

A) Bad Debts Expense 17,400
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 17,400
B) Bad Debts Expense 13,800
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 13,800
C) Bad Debts Expense 12,600
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable 12,600
D) Bad Debts Expense 22,200
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 22,200

Question 23

Princess Company's Accounts Receivable balance at December 31 was $300,000 and there was a credit balance of $1,400 in the Allowance for Doubtful Accounts. The year's sales were $1,800,000. Princess estimates credit losses for the year at 1.5% of sales.
After the appropriate adjusting entry is made for credit losses, what is the net amount of accounts receivable included in the current assets at year-end?

A) $300,000
B) $271,600
C) $325,400
D) $277,400

Question 24

Mario Company's Accounts Receivable balance at December 31 was $900,000 and there was a credit balance of $4,200 in the Allowance for Doubtful Accounts. The year's sales were $5,400,000. Mario estimates credit losses for the year at 1.5% of sales.
After the appropriate adjusting entry is made for credit losses, what is the net amount of accounts receivable included in the current assets at year-end?

A) $900,000
B) $814,800
C) $976,305
D) $832,200

Question 25

McKinley Company's Accounts Receivable balance at December 31 was $200,000, and there was a debit balance of $1,200 in the Allowance for Doubtful Accounts. Mc Kinley estimates that 3% of the Accounts Receivable will prove to be uncollectible.
After the appropriate adjusting entry is made for credit losses, what is the net amount of accounts receivable included in the current assets at year-end?

A) $175,800
B) $173.400
C) $194,000
D) $180,000

Question 26

Vandy Company's Accounts Receivable balance at December 31 was $600,000, and there was a debit balance of $3,600 in the Allowance for Doubtful Accounts. Vandy estimates that 3% of the Accounts Receivable will prove to be uncollectible.
After the appropriate adjusting entry is made for credit losses, what is the net amount of accounts receivable included in the current assets at year-end?

A) $527,400
B) $520,200
C) $582,000
D) $540,000

Question 27

Assume the following unadjusted account balances at the end of the accounting period for Cottle Company: Accounts Receivable, $30,000; Allowances for Doubtful Accounts, $800 (debit balance); Net sales, $240,000.
If Cottle Company's past experience indicates credit losses of 2% of net sales, the adjusting entry to estimate uncollectible accounts is:

A) Bad Debts Expense 4,800
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 4,800
B) Bad Debts Expense 5,600
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 5,600
C) Bad Debts Expense 4,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 4,000
D) Bad Debts Expense 4,700
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable 4,700

Question 28

Assume the following unadjusted account balances at the end of the accounting period for Jasek Company: Accounts Receivable, $90,000; Allowances for Doubtful Accounts, $2,400 (debit balance); Net sales, $720,000.
If Jaroslav Company's past experience indicates credit losses of 2% of net sales, the adjusting entry to estimate uncollectible accounts is:

A) Bad Debts Expense 14,400
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 14,400
B) Bad Debts Expense 15,300
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 15,300
C) Bad Debts Expense 12,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 12,000
D) Bad Debts Expense 14,400
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable 14,400

Question 29

Assume the following unadjusted account balances at the end of the accounting period for Montana Hardware: Accounts Receivable, $80,000; Allowance for Doubtful Accounts, $1,600 (debit balance); Sales revenue, $900,000.
If Montana Hardware ages the accounts and determines that $4,000 of the receivables may be uncollectible, the adjusting entry should be:

A) Bad Debts Expense 4,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 4,000
B) Bad Debts Expense 5,600
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 5,600
C) Bad Debts Expense 2,400
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 2,400
D) Bad Debts Expense 4,000
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable 4,000

Question 30

Assume the following unadjusted account balances at the end of the accounting period for Colorado Hardware: Accounts Receivable, $240,000; Allowance for Doubtful Accounts, $4,800 (debit balance); Sales revenue, $2,700,000.
If Colorado Hardware ages the accounts and determines that $12,000 of the receivables may be uncollectible, the adjusting entry should be:

A) Bad Debts Expense 12,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 12,000
B) Bad Debts Expense 16,800
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 16,800
C) Bad Debts Expense 7,200
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 7,200
D) Bad Debts Expense 12,000
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable 12,000

Question 31

Assume the following unadjusted account balances at the end of the accounting period for Candy Crunch Palace: Accounts Receivable, $90,000; Allowance for Doubtful Accounts, $1,000 (credit balance); and Sales revenue $600,000.
If Candy Crunch Palace ages the accounts and determines that $5,000 of receivables may be uncollectible, the adjusting entry should be:

A) Bad Debts Expense 5,000
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable 5,000
B) Bad Debts Expense 4,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 4,000
C) Bad Debts Expense 3,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 3,000
D) Bad Debts Expense 5,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 5,000

Question 32

Assume the following unadjusted account balances at the end of the accounting period for Guatemala Cafe: Accounts Receivable, $135,000; Allowance for Doubtful Accounts, $3,000 (credit balance); and Sales revenue $1,800,000.
If Guatemala ages the accounts and determines that $15,000 of receivables may be uncollectible, the adjusting entry should be:

A) Bad Debts Expense 15,000
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable 15,000
B) Bad Debts Expense 12,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 12,000
C) Bad Debts Expense 9,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 9,000
D) Bad Debts Expense 15,000
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 15,000

Question 33

New Zealand, Inc. had a $140,000 beginning balance in Accounts Receivable and a $5,000 credit balance in the Allowance for Doubtful Accounts. During the year, credit sales were $800,000 and customers' accounts collected were $810,000. Also, $4,000 in worthless accounts were written off. An aging of the accounts indicates that 5% of the end-of-the-year Accounts Receivable balance is doubtful for collection.
What amount of Bad Debts Expense should be provided at year-end?

A) $6,300
B) $7,300
C) $7,600
D) $5,300

Question 34

Monkey, Inc. had a $420,000 beginning balance in Accounts Receivable and a $15,000 credit balance in the Allowance for Doubtful Accounts. During the year, credit sales were $2,400,000 and customers' accounts collected were $2,430,000. Also, $12,000 in worthless accounts were written off. An aging of the accounts indicates that 5% of the end-of-the-year Accounts Receivable balance is doubtful for collection.
What amount of Bad Debts Expense should be provided at year-end?

A) $18.900
B) $21,900
C) $22,800
D) $15,900

Question 35

United Company uses the allowance method of recording credit losses. In November 2019, United wrote off the $1,800 account of Gamma Company. In January 2020, Gamma paid the $1,800.
The entry or entries to record the payment is/are:

A) Cash 1,800
Recoveries of Accounts Written Off 1,800
B) Accounts Receivable-Gamma Co. 1,800
Allowance for Doubtful Accounts 1,800
Cash 1,800
Accounts Receivable-Gamma Co. 1,800
C) Allowance for Doubtful Accounts 1,800
Accounts Receivable-Gamma Co. 1,800
D) Accounts Receivable-Gamma Co. 1,800
Bad Debts Expense 1,800
Cash 1,800
Accounts Receivable-Gamma Co. 1,800

Question 36

Northwest Company uses the allowance method of recording credit losses. In November 2019, Northwest wrote off the $5,400 account of Delta Company.
In January 2020, Delta paid the $5,400. The entry or entries to record the payment is/are:

A) Cash 5,400
$\quad$ $\quad$ $\quad$ Recoveries of Accounts Written Off 5,400
B) Accounts Receivable-Delta Co. 5,400
$\quad$ $\quad$ $\quad$ Northwest Company uses the allowance method Allowance for Doubtful Accounts 5,400
Cash 5,400
$\quad$ $\quad$ $\quad$ Accounts Receivable-Delta Co. 5,400
C) Allowance for Doubtful Accounts 5,400
$\quad$ $\quad$ $\quad$ Accounts Receivable-Delta Co. 5,400
D) Accounts Receivable-Delta Co. 5,400
$\quad$ $\quad$ $\quad$$\quad$ $\quad$ $\quad$ $\quad$ Bad Debts Expense 5,400
Cash 5,400
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable-Delta Co. 5,400

Question 37

Tiny Company uses the direct write-off method of recording credit losses. Tiny Company wrote off the $1,600 account of Tim Co. in October 2019. In February 2020, Tiny Company received a final $600 payment from Tim's trustee in bankruptcy.
Giant should make the following entry or entries to record the payment:

A) Cash 600
$\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 600
B) Allowance for Doubtful Accounts 600
$\quad$ $\quad$ $\quad$ $\quad$ Bad Debts Expense 600
C) Accounts Receivable-Tim Co. 600
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 600
D) Accounts Receivable-Tim Co. 600
$\quad$ $\quad$ $\quad$ Bad Debts Expense 600
Cash 600
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable-Tim Co. 600

Question 38

Mercury Company uses the direct write-off method of recording credit losses. Mercury Company wrote off the $4,800 account of Venus Co. in October 2019. In February 2020, Mercury Company received a final $1,800 payment from Venus' trustee in bankruptcy.
Mercury should make the following entry or entries to record the payment:

A) Cash 1,800
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 1,800
B) Allowance for Doubtful Accounts 1,800
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Bad Debts Expense 1,800
C) Accounts Receivable - Venus Co. 1,800
$\quad$ $\quad$ $\quad$ $\quad$ Allowance for Doubtful Accounts 1,800
D) Accounts Receivable - Venus Co. 1,800
$\quad$ $\quad$ $\quad$ Bad Debts Expense 1,800
Cash 1,800
$\quad$ $\quad$ $\quad$ $\quad$ Accounts Receivable - Venus Co. 1,800

Question 39

After writing off a customer's account, a company using the allowance method subsequently collected the account in full. It should:

A) Debit Cash and credit Accounts Receivable
B) Debit Cash and credit Miscellaneous Income
C) Debit Accounts Receivable and credit Allowance for Doubtful Accounts
D) Both A) and C)

Question 40

Robbie Company paid Hoover Company for merchandise with an $8,000, 60-day, 9% note dated April 1. If Robbie Company pays the note at maturity, what entry should Hoover make at that time?

A) Cash 8,720
$\quad$ $\quad$ Interest income 720
$\quad$ $\quad$ Notes receivable 8,000
B) Notes payable 8,000
$\quad$ $\quad$ $\quad$ Interest expense 720
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 8,720
C) Cash 8,120
$\quad$ $\quad$ $\quad$ Interest income 120
$\quad$ $\quad$ $\quad$ Notes receivable 8,000
D) Notes payable 7,880
$\quad$ $\quad$ $\quad$ Interest expense 120
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 8,000

Question 41

Chopper Company paid Keith Company for merchandise with a $24,000, 60-day, 9% note dated April 1. If Chopper Company pays the note at maturity, what entry should Keith make at that time?

A) Cash 26,160
$\quad$ $\quad$ $\quad$ Interest income 2,160
$\quad$ $\quad$ $\quad$ Notes receivable 24,000
B) Notes payable 24,000
Interest expense 2,160
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 26,160
C) Cash 24,360
$\quad$ $\quad$ $\quad$ Interest income 360
$\quad$ $\quad$ $\quad$ Notes receivable 24,000
D) Notes payable 23,640
$\quad$ $\quad$ $\quad$ Interest expense 360
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cash 24,000

Question 42

A $20,000, 3-month, 8% note is dated June 1, 2016. The maturity date and maturity value of the note are, respectively:

A) September 1, 2016; $20,400
B) August 29, 2016; $20,400
C) September 1, 2016; $400
D) August 29, 2016; $20,000

Question 43

A $60,000, 3-month, 8% note is dated June 1, 2019. The maturity date and maturity value of the note are, respectively:

A) September 1, 2019; $61,200
B) August 29, 2019; $61,200
C) September 1, 2019; $1,200
D) August 29, 2019; $60,000

Question 44

A $30,000, 120-day, 9% note is dated April 30, 2019. The maturity date and maturity value of the note are, respectively:

A) August 31, 2016; $32,960
B) August 28, 2016; $30,900
C) September 1, 2016; $32,960
D) August 28, 2016; $960

Question 45

A $90,000, 120-day, 9% note is dated April 30, 2019. The maturity date and maturity value of the note are, respectively:

A) August 31, 2019; $99,880
B) August 28, 2019; $92,700
C) September 1, 2019; $98,880
D) August 28, 2019; $ 2,880

Question 46

A note for $24,000 is dated May 3, 2019 and it matures on August 1, 2019. The note is a:

A) 3-month note
B) 90-day note
C) 91-day note
D) Both A and B

Question 47

On December 11, 2019, Fred gave a $20,000, 60-day, 9% note to Barnie in payment of an account. On December 31, 2019, Barnie should record:

A) $100 interest income
B) $100 interest expense
C) $300 interest income
D) $300 interest expense

Question 48

On December 11, 2019, Red gave a $60,000, 60-day, 9% note to Cardinal in payment of an account. On December 31, 2019, cardinal should record:

A) $300 interest income
B) $300 interest expense
C) $900 interest income
D) $900 interest expense

Question 49

On November 16, 2019, Shoe Company borrowed $20,000 from Lace Company and gave a 90-day, 12% note.
On December 31, 2019 the end of the accounting period, Lace makes the following entry:

A) Notes receivable 300
$\quad$ $\quad$ $\quad$ Interest income 300
B) Interest receivable 600
$\quad$ $\quad$ $\quad$ Interest income 600
C) Cash 300
$\quad$ $\quad$ $\quad$ Interest income 300
D) Interest receivable 300
$\quad$ $\quad$ $\quad$ $\quad$ Interest income 300

Question 50

On November 16, 2019, Pea Company borrowed $60,000 from Coat Company and gave a 90-day, 12% note.
On December 31, 2019 the end of the accounting period, Coat makes the following entry:

A) Notes receivable 900
$\quad$ $\quad$ $\quad$ Interest income 900
B) Interest receivable 1,800
$\quad$ $\quad$ $\quad$ $\quad$ Interest income 1,800
C) Cash 900
$\quad$ $\quad$ $\quad$ $\quad$ Interest income 900
D) Interest receivable 900
$\quad$ $\quad$ $\quad$ $\quad$ Interest income 900

Question 51

Rain Company paid Drop Company for merchandise with a $9,000, 90-day, 10% note dated December 11, 2019.
What entry should Drop Company make in its books at the end of the accounting period on December 31, 2019?

A) Interest receivable 50
$\quad$ $\quad$ $\quad$ $\quad$ Interest income 50
B) Cash 50
$\quad$ $\quad$ $\quad$ Interest receivable 50
C) Interest income 50
$\quad$ $\quad$ $\quad$ Interest receivable 50
D) Cash 50
$\quad$ $\quad$ $\quad$ Interest income 50

Question 52

Sun Company paid Shine Company for merchandise with a $27,000, 90-day, 10% note dated December 11, 2019.
What entry should Shine Company make in its books at the end of the accounting period on December 31, 2019?

A) Interest receivable 150
$\quad$ $\quad$ $\quad$ $\quad$ Interest income 150
B) Cash 150
$\quad$ $\quad$ $\quad$ Interest receivable 150
C) Interest income 150
$\quad$ $\quad$ $\quad$ $\quad$ Interest receivable 150
D) Cash 150
$\quad$ $\quad$ $\quad$ Interest income 150

Question 53

Angela, Inc. received a $16,000 30-day, 9% note dated December 21, 2019 from Alyssa Company. On December 31, 2019, Angela made the necessary adjusting entry to accrue interest income on the note.
Angela's entry to record payment of the note on January 20, 2020 was:

A) Cash 16,120
$\quad$ $\quad$ $\quad$ Interest income 120
$\quad$ $\quad$ $\quad$ Notes receivable 16,000
B) Cash 16,040
$\quad$ $\quad$ $\quad$ $\quad$ Interest income 40
$\quad$ $\quad$ $\quad$ $\quad$ Notes receivable 16,000
C) Cash 16,120
$\quad$ $\quad$ $\quad$ Interest receivable 40
$\quad$ $\quad$ $\quad$ $\quad$ Interest income 80
$\quad$ $\quad$ $\quad$ $\quad$ Notes receivable 16,000
D) Cash 16,080
$\quad$ $\quad$ $\quad$ Interest income 80
$\quad$ $\quad$ $\quad$ Notes receivable 16,000

Question 54

Balen, Inc. received a $48,000 30-day, 9% note dated December 21, 2019 from Vargas Company. On December 31, 2019, Balen made the necessary adjusting entry to accrue interest income on the note.
Balen's entry to record payment of the note on January 20, 2020 was:

A) Cash 48,360
$\quad$ $\quad$ $\quad$ Interest income 360
$\quad$ $\quad$ $\quad$ Notes receivable 48,000
B) Cash 48,120
$\quad$ $\quad$ $\quad$ $\quad$ Interest income 120
$\quad$ $\quad$ $\quad$ $\quad$ Notes receivable 48,000
C) Cash 48,360
$\quad$ $\quad$ $\quad$ Interest receivable 120
$\quad$ $\quad$ $\quad$ Interest income 240
$\quad$ $\quad$ $\quad$ Notes receivable 48,000
D) Cash 48,240
$\quad$ $\quad$ $\quad$ Interest income 240
$\quad$ $\quad$ $\quad$ Notes receivable 48,000

Question 55

Percy, Inc. had net sales of $1,530,000 during 2019. On January 1, 2019, Percy's accounts receivable were $320,000. On December 31, 2019, Percy's accounts receivable were $400,000.
What was Annabeth's accounts receivable turnover for 2019?

A) 4.25
B) 3.03
C) 3.83
D) 4.78

Question 56

Tower, Inc. had net sales of $4,725,000 during 2019. On January 1, 2019, Tower's accounts receivable were $960,000. On December 31, 2019, Tower's accounts receivable were $1,200,000.
What was Tower's accounts receivable turnover for 2019?

A) 4.93
B) 4.38
C) 8.53
D) 2.78

Question 57

Percy, Inc. had net sales of $1,530,000 during 2019. On January 1, 2019, Percy's accounts receivable were $320,000. On December 31, 2019, Percy's accounts receivable were $400,000.
What was Percy's average collection period for 2019?

A) 85.9 days
B) 15.5 days
C) 95.4 days
D) 43.0 days

Question 58

Tower, Inc. had net sales of $4,725,000 during 2019. On January 1, 2019, Tower's accounts receivable were $960,000. On December 31, 2019, Tower's accounts receivable were $1,200,000.
What was Tower's average collection period for 2019?

A) 83.4 days
B) 13.8 days
C) 96.2 days
D) 43.3 days

Question 59

Storm Company has net credit sales of $1,800,000 for the year and it estimates that doubtful accounts will be 2% of sales.
If its Allowance for Doubtful Accounts has a credit balance of $6,000 prior to adjustment, its balance after adjustment will be a credit of:

A) $28,000
B) $42,000
C) $27,960
D) $26,000

Question 60

Scorpion Company has net credit sales of $5,400,000 for the year and it estimates that doubtful accounts will be 2% of sales.
If its Allowance for Doubtful Accounts has a credit balance of $18,000 prior to adjustment, its balance after adjustment will be a credit of:

A) $ 84,000
B) $126,000
C) $ 83,880
D) $ 78,000

Question 61

At the beginning of 2019, Page Company's allowance for doubtful accounts is $24,000. During 2019, $8,500 was written off as uncollectible. On December 31, 2019, Page Company used an aging schedule of accounts receivable and determined that $21,060 of the accounts receivable would probably be uncollectible.
What would be the bad debts expense that should be reported on Page Company's 2019 income statement?

A) $ 2,940
B) $53,560
C) $11,440
D) $ 5,560

Question 62

At the beginning of 2019, Brown Company's allowance for doubtful accounts is $72,000. During 2019, $25,500 was written off as uncollectible. On December 31, 2019, Brown Company used an aging schedule of accounts receivable and determined that $63,180 of the accounts receivable would probably be uncollectible.
What would be the bad debts expense that should be reported on Brown Company's 2019 income statement?

A) $109,680
B) $160,680
C) $ 34,440
D) $ 16,680

Question 63

Losh Company has the following unadjusted account balances on December 31, 2019. The pre-adjustment balance of Allowance for Doubtful Accounts is $3,200 debit. This company uses the following aging of accounts receivable to estimate its bad debts.
The Net Realizable Value of Accounts Receivable reported on the year-end Balance Sheet will be:

A) $354,612
B) $391,925
C) $351,412
D) $348,212

Question 64

Pinata Company has the following unadjusted account balances on December 31, 2019. The pre-adjustment balance of Allowance for Doubtful Accounts is $9,600 debit. This company uses the following aging of accounts receivable to estimate its bad debts.
The Net Realizable Value of Accounts Receivable reported on the year-end Balance Sheet will be:

A) $1,063,836
B) $1,175,775
C) $1,054,236
D) $1,044,636

Question 65

An aging of Bicycle Company's accounts receivable indicates that $20,000 is estimated to be uncollectible.
If Allowance for Doubtful Accounts has a $3,000 credit balance, the adjustment to record bad debts for the period will require a:

A) Debit to Bad Debts Expense for $20,000
B) Debit to Allowance for Doubtful Accounts for $17,000
C) Debit to Bad Debts Expense for $17,000
D) Credit to Allowance for Doubtful Accounts for $20,000

Question 66

An aging of Coco Company's accounts receivable indicates that $60,000 is estimated to be uncollectible.
If Allowance for Doubtful Accounts has a $9,000 credit balance, the adjustment to record bad debts for the period will require a:

A) Debit to Bad Debts Expense for $60,000
B) Debit to Allowance for Doubtful Accounts for $51,000
C) Debit to Bad Debts Expense for $51,000
D) Credit to Allowance for Doubtful Accounts for $60,000

Question 67

Cunningham Company's Accounts Receivable account has a balance of $644,000 and the Allowance for Doubtful Accounts has a debit balance of $1,700 at fiscal year-end prior to adjustment.
If the estimate based on the percentage of sales approach to estimating uncollectibles is $39,800, the net realizable value of accounts receivable reported on the balance sheet after adjustment is:

A) $604,200
B) $605,900
C) $602,500
D) $642,300

Question 68

Johnnie Company's Accounts Receivable account has a balance of $1,932,000 and the Allowance for Doubtful Accounts has a debit balance of $5,100 at fiscal year-end prior to adjustment.
If the estimate based on the percentage of sales approach to estimating uncollectibles is $119,400, the net realizable value of accounts receivable reported on the balance sheet after adjustment is:

A) $1,812,600
B) $1,817,700
C) $1,807,500
D) $1,920,900

Question 69

Cooper Company's net accounts receivable before write-offs is $1,690,000. What is the balance in net accounts receivable, if $39,600 in doubtful accounts are written off?

A) $1,646,000
B) $1,734,000
C) $1,690,000
D) Cannot be determined

Question 70

Spencer Company's net accounts receivable before write-offs is $5,070,000. What is the balance in net accounts receivable, if $118,800 in doubtful accounts are written off under the allowance method?

A) $4,938,000
B) $5,202,000
C) $5,070,000
D) Cannot be determined

Question 71

Prior to the write off of a $500 customer account, Parthenon Company had the following account balances:
The net realizable value of the Accounts Receivable before and after the write-off was:
Before After

A) $18,600 $18,600
B) $18,800 $18,600
C) $18,600 $18,400
D) $18,600 $18,300

Question 72

Prior to the write off of a $1,500 customer account, Betty Company had the following account balances:
The net realizable value of the Accounts Receivable before and after the write-off was:

Question 73

Thor Company's Accounts Receivable account has a balance of $800,000 at the end of the year, and the company estimates the Net Realizable Value of Accounts Receivable to be $768,000. The Allowance for Doubtful Accounts has a credit balance of $18,000 at the beginning of the current year, and during the year, Thor wrote off $15,000 of accounts receivable.
The year-end adjusting entry would require a:

A) A credit to Allowance for Doubtful Accounts for $35,000
B) A debit to Bad Debts Expense for $14,000
C) A debit to Bad Debts Expense for $29,000
D) A credit to Allowance for Doubtful Accounts for $32,000

Question 74

Saturn Company's Accounts Receivable account has a balance of $2,400,000 at the end of the year, and the company estimates the Net Realizable Value of Accounts Receivable to be $2,304,000. The Allowance for Doubtful Accounts has a credit balance of $54,000 at the beginning of the current year, and during the year, Saturn wrote off $45,000 of accounts receivable.
The year-end adjusting entry would require a:

A) A credit to Allowance for Doubtful Accounts for $105,000
B) A debit to Bad Debts Expense for $42,000
C) A debit to Bad Debts Expense for $87,000
D) A credit to Allowance for Doubtful Accounts for $96,000

Question 75

Dahmen Company's Accounts Receivable Account has a debit balance of $1,800,000, and the Allowance for Doubtful Accounts has a debit balance of $4,000 at the end of the year before adjustment. An analysis of their customers' accounts estimates that 2% of year end account receivable will be uncollectible.
The adjusting journal entry for doubtful accounts will include:

A) Debit Bad Debts Expense $326,000
B) Credit Allowance for Doubtful Accounts, $36,000
C) Debit Bad Debts Expense $40,000
D) Credit Allowance for Doubtful Accounts, $32,000

Question 76

Gleeson Company's Accounts Receivable Account has a debit balance of $5,400,000, and the Allowance for Doubtful Accounts has a debit balance of $12,000 at the end of the year before adjustment. An analysis of their customers' accounts estimates that 2% of year end account receivable will be uncollectible.
The adjusting journal entry for doubtful accounts will include:

A) Debit Bad Debts Expense $978,000
B) Credit Allowance for Doubtful Accounts, $108,000
C) Debit Bad Debts Expense $120,000
D) Credit Allowance for Doubtful Accounts, $96,000

Question 77

On January 1, 2019, the accounts receivable balance for Hades Company was $14,000 and the balance in the allowance for doubtful accounts was $1,400. On that day, a $600 doubtful account was written-off.
The net realizable value of accounts receivable immediately after the write-off is:

A) $12,600
B) $13,600
C) $13,000
D) $12,200

Question 78

On January 1, 2019, the accounts receivable balance for Heaven Company was $42,000 and the balance in the allowance for doubtful accounts was $4,200. On that day, a $1,800 doubtful account was written-off.
The net realizable value of accounts receivable immediately after the write-off is:

A) $37,800
B) $40,800
C) $39,000
D) $36,300

Question 79

The data below is for Cronus Corporation for 2019.
If the aging approach is used to estimate bad debts, determine the bad debt expense for 2019.

A) $16,000
B) $16,200
C) $17,400
D) $19,800

Question 80

The data below is for Beta Corporation for 2019.
If the aging approach is used to estimate bad debts, determine the bad debt expense for 2019.

A) $48,000
B) $48,600
C) $52,200
D) $59,400