Question 1

What are the two methods of accounting for uncollectible accounts?

Accepted Answer

The answer of What are the two methods of accounting...

Question 2

On March 10, 2012, Allyson Enterprises determined that its customer Betty Chow's account for $780 was considered uncollectible. If Allyson uses the allowance method, what is the journal entry required to write off Betty Chow's account?

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Question 3

The journal entry to write off a customer's account under the direct write-off method is:

Accepted Answer

The direct write-off method is used when a specific customer's account is deemed uncollectible. In this method, the bad debt expense is recognized at the time of write-off. Therefore, the correct journal entry would be to debit Bad Debts Expense and credit the Accounts Receivable of the specific customer being written off. Option A is incorrect as it credits the Allowance for Doubtful Accounts, which is used in the allowance method. Option B is not a valid answer as it does not provide a journal entry. Option C is incorrect as it does not reflect the nature of the transaction, which is to write off an uncollectible account. Option E is incorrect as it does not reflect the decrease in Accounts Receivable resulting from the write-off.

Question 4

Margaret is a customer of Tammy Company. The company wrote off her account of $1,200 on August 15. On October 12, she sent in a payment of $560. What is the journal entry that Tammy Company will record first to reinstate her account?

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The answer of Margaret is a customer of Tammy Company....

Question 5

A company has $317,000 in credit sales. The company uses the allowance method of determining Bad Debts Expense. The Allowance for Doubtful Accounts now has an $8,150 debit balance. If the company uses the allowance method based on 6% of credit sales, what will be the amount of the journal entry credited to Allowance for Doubtful Accounts?

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Question 6

How is the "net realizable value" of accounts receivable computed ?

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Question 7

What type of account is Allowance for Doubtful accounts?

Accepted Answer

Allowance for Doubtful Accounts is a contra-asset account, which reduces the value of accounts receivable on the balance sheet. It represents the estimated amount of accounts receivable that are unlikely to be collected.

Question 8

The period-end adjusting entry for Bad Debts Expense under the direct write-off method is:

Accepted Answer

The direct write-off method does not require a period-end adjusting entry for Bad Debts Expense. Instead, Bad Debts Expense is recorded only when a specific customer's account is deemed uncollectible and is written off as a loss. This method is not acceptable under generally accepted accounting principles (GAAP) for financial reporting purposes due to its lack of conservatism and matching principle.

Question 9

Which method for accounting for uncollectible accounts is not acceptable for financial reporting purposes?

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Question 10

A company has $235,000 in credit sales. The company uses the allowance method of determining Bad Debts Expense. The Allowance for Doubtful Accounts now has a $7,250 credit balance. If the company uses the allowance method based on 7% of credit sales, what will be the amount of the journal entry credited to Allowance for Doubtful Accounts?

Accepted Answer

The answer of A company has $235,000 in credit sales....

Question 11

Which is NOT a benefit to extending credit to customers?

Accepted Answer

Bad debt expenses are a cost and a risk associated with extending credit to customers. This means that it is not a benefit, but a potential drawback.

Question 12

Use the allowance method to account for uncollectible accounts
-The percentage-of-sales method is called the balance sheet method.

Accepted Answer

The percentage-of-sales method is actually called the income statement method, as it focuses on estimating bad debts based on the amount of credit sales made during a period. In contrast, the allowance method is a balance sheet method, as it involves creating a contra asset account to reflect the estimated amount of uncollectible accounts, which is reported on the balance sheet.

Question 13

Taymon Company has given you the following information from its aging of accounts receivable. Using
this information, what is the journal entry to record the periodic adjustment for bad debts? Assume the amount in the allowance for doubtful accounts is $$850 credit.

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Question 14

What account is credited in the Allowance method of recording uncollectible accounts when an uncollectible customer account is written off?

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Question 15

Brandon Company completed an aging of their accounts receivable and came up with an estimated
amount of $6,342. The credit sales for the period are $85,000. The balance in the Allowance for Doubtful Accounts is a debit of $817. If Brandon uses 5% of credit sales as their estimating uncollectible accounts, how much will the credit be to the Allowance for Doubtful Accounts if Brandon uses the percentage of credit sales as its method of estimating uncollectible accounts?

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The answer of Brandon Company completed an aging of their...

Question 16

Under the percentage of sales method, how is Bad Debts Expense calculated?

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Question 17

A company has $295,000 in credit sales. The company uses the allowance method of determining Bad Debts Expense. The Allowance for Doubtful Accounts now has a $250 debit balance. The company uses the allowance method based on an aging of accounts receivable and determines $13,400 as uncollectible. What will be the amount of the Bad Debts Expense and what is the journal entry?

Accepted Answer

The answer of A company has $295,000 in credit sales....

Question 18

Use the allowance method to account for uncollectible accounts
-Bad Debts Expense is debited when writing off customer accounts under the Allowance method.

Accepted Answer

Under the allowance method, Bad Debts Expense is debited when estimating the amount of uncollectible accounts, not when individual customer accounts are written off. When writing off an account, Allowance for Doubtful Accounts is debited, and Accounts Receivable is credited.

Question 19

Taylor Company has given you the following information from its aging of accounts receivable. Using
this information, determine the ending balance of the allowance for doubtful accounts.
  
Current amount in the allowance for doubtful accounts is a $958 credit.

Accepted Answer

The answer of Taylor Company has given you the following...

Question 20

Under the direct write-off method, to record the receipt of cash after an account has previously been written off, you would first:

Accepted Answer

When using the direct write-off method, if cash is received after an account has been written off, the first step is to reinstate the customer's account. This involves reversing the write-off by debiting Accounts Receivable and crediting Bad Debts Expense (or a similar account used for the write-off). This step restores the customer's account to its original state, allowing the subsequent recording of the cash receipt.

Quiz 7: Sales and Receivables