Question 1

Benson Company estimates its uncollectible accounts by aging its accounts receivable and applying percentages to various aged categories of accounts. Benson computes a total of $1,800 in estimated uncollectible accounts as of December 31. Its Accounts Receivable account has a balance of $56,400 and its Allowance for Doubtful Accounts has a balance of $300 before adjustment at December 31.
How much bad debt expense will Benson report in the current year?

Accepted Answer

The bad debt expense is calculated as the difference between the estimated uncollectible accounts ($1,800) and the existing balance in the Allowance for Doubtful Accounts ($300). Therefore, the bad debt expense is $1,800 - $300 = $1,500.

Question 2

On December 31, before adjusting entries, Accounts Receivable had a balance of $100,000, and the Allowance for Doubtful Accounts had a balance of $3,000. Credit sales for the year were $800,000.
If credit losses are estimated at 1% of credit sales:

Accepted Answer

The answer of On December 31, before adjusting entries, Accounts...

Question 3

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

Accepted Answer

The correct entry to write off an account under the allowance method involves reducing both the Allowance for Doubtful Accounts (a contra-asset account) and the specific Accounts Receivable (Mendez, Inc. in this case), reflecting the removal of the uncollectible amount from the company's books.

Question 4

Assume the following unadjusted account balances at the end of the accounting period: Accounts Receivable, $50,000; Allowance for Doubtful Accounts, $700 (negative balance); and Net sales, $600,000. If the company's past experience indicates credit losses of 1% of net sales, the effect on the financial statements of the adjustment to estimate uncollectible accounts is:

Accepted Answer

The answer of Assume the following unadjusted account balances at...

Question 5

A firm's $90,000 Accounts Receivable balance at December 31 consisted of $80,000 current balances and $10,000 past-due balances. At December 31, the Allowance for Uncollectible Accounts had a balance of $800. The firm estimated that 2% of current balances and 15% of past-due balances will prove uncollectible. The effect of the adjustment to record credit losses on the financial statements is:

Accepted Answer

The answer of A firm's $90,000 Accounts Receivable balance at...

Question 6

Ruiz Company's Accounts Receivable balance at December 31 was $150,000 and there was a balance of $700 in the Allowance for Uncollectible Accounts. Sales for the year were $900,000. The firm 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?

Accepted Answer

The net amount of accounts receivable is $135,800. This is calculated by taking the Accounts Receivable balance of $150,000 and subtracting the Allowance for Uncollectible Accounts balance of $700, and then adding the estimated credit losses of $13,500 (1.5% of sales of $900,000).

Question 7

McKensie Company's Accounts Receivable balance at December 31 was $100,000, and there was a negative balance of $600 in the Allowance for Uncollectible Accounts. The firm 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?

Accepted Answer

The estimated uncollectible amount is 3% of $100,000, which is $3,000. The Allowance for Uncollectible Accounts needs to be adjusted from a negative $600 to a positive $3,000, requiring an adjustment of $3,600. The net accounts receivable is $100,000 - $3,000 = $97,000.

Question 8

Mangini Company has net credit sales of $900,000 for the year and it estimates that uncollectible accounts will be 2% of sales. If its Allowance for Doubtful Accounts has a balance of $3,000 prior to adjustment, its balance after adjustment will be a credit of

Accepted Answer

The answer of Mangini Company has net credit sales of...

Question 9

Assume the following unadjusted account balances at the end of the accounting period: Accounts Receivable, $15,000; Allowances for Uncollectible Accounts, -$400 (negative balance); Net sales, $120,000. If the company's past experience indicates credit losses of 2% of net sales, the effect of the adjustment to estimate uncollectible accounts on the financial statements is:

Accepted Answer

The answer of Assume the following unadjusted account balances at...

Question 10

Assume the following unadjusted account balances at the end of the accounting period: Accounts Receivable, $40,000; Allowance for Uncollectible Accounts, -$800 (negative balance); Sales revenue, $450,000. If the company ages the accounts and determines that $2,000 of the receivables may be uncollectible, the effect of the adjustment on the financial statements would be:

Accepted Answer

The answer of Assume the following unadjusted account balances at...

Question 11

Assume the following unadjusted account balances at the end of the accounting period: Accounts Receivable, $45,000; Allowance for Uncollectible Accounts, $500; and Sales revenue $300,000. If the company ages the accounts and determines that $2,500 of receivables may be uncollectible, the effect of the adjustment on the financial statements would be:

Accepted Answer

The answer of Assume the following unadjusted account balances at...

Question 12

Forrester Inc. had a $70,000 beginning balance in Accounts Receivable and a $2,500 balance in the Allowance for Uncollectible Accounts. During the year, credit sales were $400,000 and customers' accounts collected were $405,000. Also, $2,000 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 Debt Expense should be provided at year-end?

Accepted Answer

The answer of Forrester Inc. had a $70,000 beginning balance...

Question 13

At the beginning of the year, Loeb Company's allowance for doubtful accounts is $12,000. During the year, $4,250 was written off as uncollectible. On December 31, Loeb Company used an aging schedule of accounts receivable and determined that $10,530 of accounts receivable would probably be uncollectible.
What is the amount of bad debt expense that should be reported on Loeb Company's income statement for the year?

Accepted Answer

The bad debt expense is calculated as the ending balance of the allowance for doubtful accounts minus the beginning balance, adjusted for any write-offs. Starting with a $12,000 allowance, $4,250 was written off, reducing the allowance to $7,750. To adjust the allowance to the new estimate of $10,530, an additional $2,780 ($10,530 - $7,750) needs to be added as bad debt expense.

Question 14

Triandis Company has the following unadjusted account balances on December 31, of the current year. The pre-adjustment balance of Allowance for Doubtful Accounts is a negative $1,600. 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:

Accepted Answer

The answer of Triandis Company has the following unadjusted account...

Question 15

A firm that uses the allowance method of recording credit losses wrote off the $900 account of Beta Company in November. In January, Beta paid the $900. What is the effect of the re-instatement and the payment on total assets?

Accepted Answer

When a firm using the allowance method writes off an account, it reduces accounts receivable and the allowance for doubtful accounts by the same amount, leaving total assets unchanged. When the amount is later paid, the firm reverses the write-off (increasing both accounts receivable and the allowance for doubtful accounts) and then records the payment (decreasing accounts receivable and increasing cash). The net effect on total assets is zero because the reinstatement and payment only shift amounts within assets, without changing the total.

Question 16

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

Accepted Answer

When a company using the allowance method collects on an account previously written off, it first reverses the write-off by increasing Accounts Receivable and increasing the Allowance for Uncollectible Accounts (C), and then records the collection by increasing Cash and decreasing Accounts Receivable (A).

Question 17

An aging of a company's accounts receivable indicates that $10,000 is estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,500 balance, the adjustment to record bad debt expense for the period will require a(an):

Accepted Answer

The correct adjustment is to increase Bad Debt Expense by the difference between the estimated uncollectible amount ($10,000) and the existing balance in the Allowance for Doubtful Accounts ($1,500), which is $8,500. This ensures the allowance account reflects the updated estimate of uncollectible accounts.

Question 18

Long Company's Accounts Receivable account has a balance of $322,000 and the Allowance for Doubtful Accounts has a negative balance of $850 at fiscal year-end prior to adjustment. If the estimate based on the percentage of sales approach to estimating uncollectibles is $19,900, the net realizable value of accounts receivable reported on the balance sheet after adjustment is:

Accepted Answer

The net realizable value of accounts receivable is calculated by subtracting the adjusted Allowance for Doubtful Accounts from the Accounts Receivable balance. The adjustment to the Allowance for Doubtful Accounts is the difference between the current balance (-$850) and the new estimate ($19,900), which is $20,750 ($19,900 - (-$850)). Therefore, the adjusted net realizable value is $322,000 (Accounts Receivable) - $20,750 (adjusted Allowance for Doubtful Accounts) = $301,250. However, the correct calculation should consider the negative sign of the initial Allowance for Doubtful Accounts balance correctly, leading to the adjusted balance of the Allowance for Doubtful Accounts being $19,900, not the difference calculation I mistakenly described. Subtracting the correct adjusted allowance from the Accounts Receivable gives us $322,000 - $19,900 = $302,100, which is not among the options provided due to my calculation error. The correct approach to find the net realizable value after adjustment directly involves subtracting the new allowance estimate from the Accounts Receivable balance, which I incorrectly calculated. The correct net realizable value should indeed be based on the proper adjustment of the allowance account according to the new estimate, directly affecting the net realizable value calculation.

Question 19

Prior to the write off of a $250 customer account, McDonald Company had the following account balances:
 The net realizable value of Accounts Receivable before and after the write-off was:

Accepted Answer

The answer of Prior to the write off of a...

Question 20

Doe Company's Accounts Receivable account has a balance of $400,000 at the end of the year, and the company estimates the Net Realizable Value of Accounts Receivable to be $384,000. The Allowance for Doubtful Accounts has a balance of $9,000 at the beginning of the current year, and during the year, the company wrote off $7,500 of accounts receivable.
The year-end adjustment would require:

Accepted Answer

The required allowance at year-end is $16,000 ($400,000 - $384,000). The beginning balance was $9,000, and $7,500 was written off, leaving $1,500. Therefore, an additional $14,500 is needed to reach the required $16,000.

Quiz 6: Receivables

On December 31, before adjusting entries, Accounts Receivable had a balance of $100,000, and the Allowance for Doubtful Accounts had a balance of $3,000. Credit sales for the year were $800,000. If credit losses are estimated at 1% of credit sales:

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

Mangini Company has net credit sales of $900,000 for the year and it estimates that uncollectible accounts will be 2% of sales. If its Allowance for Doubtful Accounts has a balance of $3,000 prior to adjustment, its balance after adjustment will be a credit of

A firm that uses the allowance method of recording credit losses wrote off the $900 account of Beta Company in November. In January, Beta paid the $900. What is the effect of the re-instatement and the payment on total assets?

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

An aging of a company's accounts receivable indicates that $10,000 is estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,500 balance, the adjustment to record bad debt expense for the period will require a(an) :

Prior to the write off of a $250 customer account, McDonald Company had the following account balances: The net realizable value of Accounts Receivable before and after the write-off was: