Question 1

On December 31 of the current year,a company's unadjusted trial balance included the following: Accounts Receivable,debit balance of $97,250; Allowance for Doubtful Accounts,credit balance of $951.What amount should be debited to Bad Debts Expense,assuming 6% of outstanding accounts receivable at the end of the current year will be uncollectible?

Accepted Answer

To calculate the amount to be debited to Bad Debts Expense, we first need to determine the ending balance of the Allowance for Doubtful Accounts. Assuming 6% of outstanding accounts receivable at the end of the year will be uncollectible, we can calculate this as:

Ending balance of Allowance for Doubtful Accounts = (6% * $97,250) - $951
= $5,835

To adjust the allowance account to this ending balance, we need to credit it by $4,884:

Credit to Allowance for Doubtful Accounts = $5,835 - $951
= $4,884

And since we are crediting the allowance account, we need to debit Bad Debts Expense by the same amount:

Debit to Bad Debts Expense = $4,884

Therefore, the answer is C.

Question 2

The amount due on the date of maturity for a $6,000,60-day,8%,note receivable is:

Accepted Answer

The maturity value of the note is calculated by adding the interest to the principal. The interest is calculated as $6,000 * 8% * (60/365) = $80. Therefore, the amount due is $6,000 + $80 = $6,080.

Question 3

Temper Company has credit sales of $3.10 million for year 2013.Temper estimates that .9% of the credit sales will not be collected.On December 31,2013,the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $2,222.Assuming the company uses the percent of sales method,what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

Accepted Answer

The answer of Temper Company has credit sales of $3.10...

Question 4

When the maker of a note honors a note this indicates that the note is:

Accepted Answer

When the maker of a note honors a note, it means they have paid the note in full.

Question 5

A company used the percent of sales method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts:  All sales are made on credit.Based on past experience,the company estimates 0.5% of credit sales to be uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

Accepted Answer

To calculate the amount of bad debts expense to be debited, we need to determine the credit sales for the year. As this information is not given in the question, we can use the fact that all sales are made on credit and use the total sales figure given in the trial balance ($900,000).

0.5% of $900,000 = $4,500, which should be debited to Bad Debts Expense when the year-end adjusting entry is prepared. Therefore, the answer is (D).

Question 6

Wallah Company agreed to accept $5,000 in cash along with an $8,000,90-day,13.5% note from customer Judith Klemper to settle her $13,000 past-due account.How should Wallah record this transaction?

Accepted Answer

The answer of Wallah Company agreed to accept $5,000 in...

Question 7

Temper Company has credit sales of $3.10 million for year 2013.Accounts Receivable total $947,360 and the company estimates that 2% of accounts receivable will remain uncollectible.Historically,.9% of sales have been uncollectible.On December 31,2013,the company's Allowance for Doubtful Accounts has an unadjusted debit balance of $2,575.Temper prepared a schedule of its December 31,2013,accounts receivable by age.Based on past experience,it estimates the percent of receivables in each age category that will become uncollectible.This information is summarized here:  Assuming the company uses the percent of accounts receivable method,what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

Accepted Answer

The answer of Temper Company has credit sales of $3.10...

Question 8

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

Accepted Answer

The aging of accounts receivable method involves examining outstanding accounts and categorizing them by their length of time past due. This allows for a more accurate estimation of bad debts expense based on the likelihood of non-collection. The other methods listed do not involve such detailed analysis of outstanding accounts.

Question 9

Teller,a calendar year company,purchased merchandise from TechCom on October 17 of the current year.TechCom accepted Teller's $4,800,90-day,10% note as payment.What entry should TechCom make on January 15 of the next year when the note is paid,assuming an adjusting entry for interest was made for interest on December 31?

Accepted Answer

The answer of Teller,a calendar year company,purchased merchandise from TechCom...

Question 10

Paoli Pizza bought $5,000 worth of merchandise from TechCom and signed a 90-day,10% promissory note for the $5,000.TechCom's journal entry to record the sales portion of the transaction is:

Accepted Answer

The journal entry to record the sale portion of the transaction is:
Debit: Accounts Receivable for $5,500
Credit: Sales for $5,000
Credit: Interest Revenue for $500 (10% of $5,000) 
Option B is the correct answer as it debits Accounts Receivable for $5,500 and credits Sales for $5,000 as it is the sale portion of the transaction. The other options did not record the sale correctly.

Question 11

An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales and (2) reports accounts receivable at the amount of cash to be collected is the:

Accepted Answer

The allowance method of accounting for bad debts meets the given criteria of estimating and reporting bad debts expense based on credit sales during the period, as well as reporting accounts receivable at the estimated amount to be collected. This is achieved through establishing an allowance for doubtful accounts, which is based on a percentage of credit sales or an analysis of the aging of accounts receivable. The direct write-off method does not estimate bad debts expense and violates the matching principle, while the aging of notes receivable and adjustment method for uncollectible debts are not relevant to the criteria given. The cash basis method of accounting for bad debts is not in accordance with Generally Accepted Accounting Principles (GAAP) and does not consider the matching principle.

Question 12

Failure by a promissory note's maker to pay the amount due at maturity is known as:

Accepted Answer

Dishonoring a note refers to the failure by the maker to pay the amount due at maturity. Protesting a note refers to the formal declaration by a notary public that a negotiable instrument, such as a promissory note, has been dishonored. Closing a note is not a common term in the context of promissory notes. Discounting a note refers to the process of selling a promissory note to a financial institution at a discounted rate in exchange for immediate cash. Depreciating a note is not applicable as notes do not have a physical asset value that can depreciate.

Question 13

Electron borrowed $75,000 cash from TechCom by signing a promissory note.TechCom's entry to record the transaction should include a:

Accepted Answer

When Electron borrowed $75,000 from TechCom, it signed a promissory note which indicates that Electron will pay back the borrowed amount in the future. As TechCom is the creditor, it should record this transaction by debiting Notes Receivable for $75,000.

Question 14

Newton Company uses the allowance method of accounting for uncollectible accounts.On May 3,the Newton Company wrote off the $3,000 uncollectible account of its customer,P.Best.On July 10,Newton received a check for the full amount of $3,000 from Best.On July 10,the entry or entries Newton makes to record the recovery of the bad debt is:

Accepted Answer

The answer of Newton Company uses the allowance method of...

Question 15

A company ages its accounts receivables to determine its end of period adjustment for bad debts.At the end of the current year,management estimated that $15,750 of the accounts receivable balance would be uncollectible.Prior to any year-end adjustments,the Allowance for Doubtful Accounts had a debit balance of $175.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer

The answer of A company ages its accounts receivables to...

Question 16

Temper Company has credit sales of $3.10 million for year 2013.Temper estimates that .9% of the credit sales will not be collected.On December 31,2013,the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $2,222.Temper prepares a schedule of its December 31,2013,accounts receivable by age.Based on past experience,it estimates the percent of receivables in each age category that will become uncollectible.This information is summarized here:  Assuming the company uses the aging of Accounts Receivable method,what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

Accepted Answer

$620,000 x .0105 = $6,510.00 $248,000 x .0180 = $4,464.00 $ 49,600 x .0630 = $3,124.80 $ 24,800 x .3175 = $7,874.00 $ 4,960 x .6600 = $3,273.60 Total $25,246.40 desired ending balance $25,246.40 - $2,222 = $23,024.40 adjustment

Question 17

On December 31 of the current year,a company's unadjusted trial balance included the following: Accounts Receivable,debit balance of $88,790; Allowance for Doubtful Accounts,credit balance of $1,245.What amount should be debited to Bad Debts Expense,assuming 4% of outstanding accounts receivable at the end of the current year are considered uncollectible?

Accepted Answer

To calculate the amount to be debited to Bad Debts Expense, we need to first calculate the estimated amount of uncollectible accounts based on the given information.

Outstanding accounts receivable = $88,790 
Estimated uncollectible accounts = 4% x $88,790 = $3,551.60

We then need to adjust the Allowance for Doubtful Accounts to reflect this estimated amount:

Previous balance in Allowance for Doubtful Accounts = $1,245 
Add: Estimated uncollectible accounts = $3,551.60 
New balance in Allowance for Doubtful Accounts = $4,796.60

To adjust the accounts, we need to debit Bad Debts Expense and credit Allowance for Doubtful Accounts by the difference between the new and previous balances in the allowance account:

Bad Debts Expense = New balance in Allowance for Doubtful Accounts ($4,796.60) - Previous balance in Allowance for Doubtful Accounts ($1,245) 
= $3,551.60

Therefore, the correct answer is D) $2,306.60

Question 18

According to GAAP,the amount of bad debt expense can be estimated by:

Accepted Answer

GAAP allows for multiple methods to estimate bad debt expense including the percent of sales method, percent of accounts receivable method, and the aging of accounts receivable method. Therefore, the best choice is E, as it includes all three methods.

Question 19

Mix Recording Studios purchased $7,800 in electronic components from TechCom.Mix Recording Studios signed a 60-day,10% promissory note for $7,800.TechCom's journal entry to record the sales portion of the transaction is:

Accepted Answer

The answer of Mix Recording Studios purchased $7,800 in electronic...

Question 20

A company ages its accounts receivables to determine its end of period adjustment for bad debts.At the end of the current year,management estimated that $39,375 of the accounts receivable balance would be uncollectible.Prior to any year-end adjustments,the Allowance for Doubtful Accounts had a credit balance of $3,285.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer