Question 1

A company has net credit sales of $900,000 for the year and it estimates that uncollectible accounts will be 2% of sales. If Allowance for Doubtful Accounts has a credit balance of $1,000 prior to adjustment, its balance after adjustment will be a credit of

Accepted Answer

The estimated uncollectible accounts are 2% of $900,000, which is $18,000. The Allowance for Doubtful Accounts already has a credit balance of $1,000, so after adjustment, it will be $18,000 + $1,000 = $19,000.

Question 2

An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

Accepted Answer

The aging of accounts receivable indicates that $4,000 are estimated to be uncollectible. The Allowance for Doubtful Accounts already has a credit balance of $1,200. Therefore, to adjust for bad debts, we need to increase the allowance by $2,800 ($4,000 - $1,200). This can be done by debiting the Bad Debts Expense account for $2,800 and crediting the Allowance for Doubtful Accounts for $2,800. So, the correct choice is C.

Question 3

Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 credit before adjustment, what is the amount of bad debts expense for the period?

Accepted Answer

The amount of bad debts expense for the period can be calculated as follows:
Bad Debts Expense = Estimated Uncollectible Accounts - Existing Credit Balance in Allowance for Doubtful Accounts
Bad Debts Expense = $28,000 - $7,000 = $21,000 (Option B)

Question 4

Using the following information:  During 2010, sales on account were $145,000 and collections on account were $86,000. Also during 2010, the company wrote off $8,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that uncollectible accounts should be estimated at $54,000.
Bad debts expense for 2010 is

Accepted Answer

The answer of Using the following information:  During 2010,...

Question 5

Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $10,000. If the balance of the Allowance for Doubtful Accounts is $2,000 credit before adjustment, what is the amount of bad debts expense for that period?

Accepted Answer

The amount of bad debts expense for the period is equal to the increase in the Allowance for Doubtful Accounts from $2,000 to $10,000, which is $8,000 ($10,000 - $2,000).

Question 6

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record estimated uncollectible accounts

Accepted Answer

The balance of Allowance for Doubtful Accounts is relevant when using the percentage of receivables basis because this method focuses on the desired balance in the allowance account after adjustments, taking into account the existing balance before making the adjustment.

Question 7

Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $10,000. If the balance of the Allowance for Doubtful Accounts is $2,000 debit before adjustment, what is the balance after adjustment?

Accepted Answer

The answer of Using the percentage of receivables method for...

Question 8

Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $25,000. If the balance of the Allowance for Doubtful Accounts is $8,000 debit before adjustment, what is the amount of bad debts expense for that period?

Accepted Answer

The amount of bad debts expense for the period is equal to the increase in the allowance for doubtful accounts. The current balance of the allowance for doubtful accounts is $8,000, and the estimated uncollectible accounts are $25,000. Therefore, the required increase in the allowance is $25,000 - $8,000 = $17,000. This is the amount of bad debts expense for the period, so the correct answer is (C) $33,000.

Question 9

The percentage of receivables basis for estimating uncollectible accounts emphasizes

Accepted Answer

The percentage of receivables basis for estimating uncollectible accounts emphasizes the cash realizable value of accounts receivable by estimating the portion of receivables that will not result in cash collection. This method focuses on estimating a realistic value of how much cash will ultimately be collected from outstanding accounts, which is the cash realizable value.

Question 10

In reviewing the accounts receivable, the cash realizable value is $16,000 before the write-off of a $1,500 account. What is the cash realizable value after the write-off?

Accepted Answer

The cash realizable value remains $16,000 because the write-off of an account does not affect the net realizable value of accounts receivable when using the allowance method.

Question 11

Under the direct write-off method of accounting for uncollectible accounts

Accepted Answer

Under the direct write-off method, a specific account receivable is decreased for the actual amount of bad debt at the time of write-off. This method does not use an allowance account to estimate bad debts and does not emphasize balance sheet relationships. Bad debts expense is only recorded when a specific account becomes uncollectible and is written off.

Question 12

Hahn Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $500,000 and credit sales are $2,000,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Hahn Company make to record the bad debts expense?

Accepted Answer

The answer of Hahn Company uses the percentage of sales...

Question 13

When an account is written off using the allowance method, accounts receivable

Accepted Answer

When an account is written off using the allowance method, the accounts receivable balance is unchanged because the specific receivable being written off is removed from accounts receivable and the allowance for doubtful accounts simultaneously, resulting in a decrease in both accounts receivable and the allowance account.

Question 14

Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 debit before adjustment, what is the amount of bad debts expense for the period?

Accepted Answer

The bad debts expense is calculated by adjusting the Allowance for Doubtful Accounts to the estimated uncollectible amount. Since the allowance account has a $7,000 debit balance, you need to add $35,000 to reach the $28,000 credit balance (i.e., $28,000 + $7,000 = $35,000).

Question 15

An aging of a company's accounts receivable indicates that $3,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a

Accepted Answer

The adjustment should bring the Allowance for Doubtful Accounts to the estimated uncollectible amount of $3,000. Since there is already a $1,200 debit balance, an additional $4,200 debit to Bad Debts Expense is needed to offset this and reach the $3,000 credit balance.

Question 16

Two bases for estimating uncollectible accounts are:

Accepted Answer

The two most commonly used bases for estimating uncollectible accounts are the percentage of receivables and the percentage of sales. The percentage of receivables method involves estimating the percentage of accounts receivable that will eventually be uncollectible, while the percentage of sales method involves estimating the percentage of credit sales that will eventually become uncollectible. These two methods can be used in combination to provide a more accurate estimate of uncollectible accounts.

Question 17

The direct write-off method of accounting for bad debts

Accepted Answer

The direct write-off method does not require estimates of bad debt losses, as they are only recognized when they are actually written off. However, this method is not preferred under generally accepted accounting principles due to its lack of accuracy and matching principle.

Question 18

In 2010, Garrison Company had net credit sales of $1,125,000. On January 1, 2010, Allowance for Doubtful Accounts had a credit balance of $27,000. During 2010, $45,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was $300,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2010?

Accepted Answer

First, we need to calculate the required balance of the allowance for doubtful accounts using the percentage of receivables basis: 
$300,000 x 10% = $30,000 
Next, we need to adjust the balance of the allowance for doubtful accounts for the write-offs during the year: 
$27,000 - $45,000 = -$18,000 (a debit balance) 
This means the company overestimated the allowance for doubtful accounts and needs to decrease it by $18,000. 
Finally, we need to adjust the allowance for doubtful accounts to its required balance: 
$30,000 - (-$18,000) = $48,000 
Therefore, the required adjustment to the allowance for doubtful accounts at December 31, 2010, is $48,000, which is option C.

Question 19

Using the following information:  During 2010, sales on account were $145,000 and collections on account were $86,000. Also during 2010, the company wrote off $8,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that uncollectible accounts should be estimated at $54,000.
The change in the cash realizable value from the balance at 12/31/09 to 12/31/10 was a

Accepted Answer

The answer of Using the following information:  During 2010,...

Question 20

In 2010, the Dugan Co. had net credit sales of $750,000. On January 1, 2010, Allowance for Doubtful Accounts had a credit balance of $16,000. During 2010, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivable basis). If the accounts receivable balance at December 31 was $200,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2010?

Accepted Answer

The required adjustment to the Allowance for Doubtful Accounts is $34,000. This is calculated as follows:Allowance for Doubtful Accounts = 10% x Accounts Receivable= 10% x $200,000= $20,000Required adjustment = Allowance for Doubtful Accounts - Beginning balance + Write-offs= $20,000 - $16,000 + $30,000= $34,000

Quiz 9: Accounting for Receivables

A company has net credit sales of $900,000 for the year and it estimates that uncollectible accounts will be 2% of sales. If Allowance for Doubtful Accounts has a credit balance of $1,000 prior to adjustment, its balance after adjustment will be a credit of

An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 credit before adjustment, what is the amount of bad debts expense for the period?

Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $10,000. If the balance of the Allowance for Doubtful Accounts is $2,000 credit before adjustment, what is the amount of bad debts expense for that period?

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record estimated uncollectible accounts

Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $10,000. If the balance of the Allowance for Doubtful Accounts is $2,000 debit before adjustment, what is the balance after adjustment?

Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $25,000. If the balance of the Allowance for Doubtful Accounts is $8,000 debit before adjustment, what is the amount of bad debts expense for that period?

The percentage of receivables basis for estimating uncollectible accounts emphasizes

In reviewing the accounts receivable, the cash realizable value is $16,000 before the write-off of a $1,500 account. What is the cash realizable value after the write-off?

Under the direct write-off method of accounting for uncollectible accounts

Hahn Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $500,000 and credit sales are $2,000,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Hahn Company make to record the bad debts expense?

When an account is written off using the allowance method, accounts receivable

Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 debit before adjustment, what is the amount of bad debts expense for the period?

An aging of a company's accounts receivable indicates that $3,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a

Two bases for estimating uncollectible accounts are:

The direct write-off method of accounting for bad debts