Question 1

The allowance for uncollectible accounts is an expense on the income statements.

Accepted Answer

The allowance for uncollectible accounts is a contra asset account on the balance sheet that reduces the total accounts receivable to reflect the amount expected to be collected.

Question 2

Bad debts expense is a contra-asset account on the balance sheet.

Accepted Answer

Bad debts expense is recorded on the income statement as an expense, not on the balance sheet. The related contra-asset account for bad debts on the balance sheet is the allowance for doubtful accounts.

Question 3

Y Company obtained the following balances from its computerized accounting information system at the end of the year before adjustments:  The company estimates that 20% of accounts receivable will be uncollectible.After the correct adjusting entry has been made,bad debts expense for the year will be:

Accepted Answer

The answer of Y Company obtained the following balances from...

Question 4

Y Company obtained the following balances from its computerized accounting information system at the end of the year before adjustments:  The company estimates that 2% of net sales will be uncollectible.After the correct adjusting entry has been made,what is the Net accounts receivable on the year-end balance sheet?

Accepted Answer

The net accounts receivable can be calculated by subtracting the estimated uncollectible accounts from the accounts receivable balance.

Net accounts receivable = Accounts receivable - Estimated uncollectible accounts
Net accounts receivable = $22,000 ($22,400 - 2%*$400,000)

Question 5

Y Company obtained the following balances from its computerized accounting information system at the end of the year before adjustments:  The company estimates that 20% of accounts receivable will be uncollectible.After the correct adjusting entry has been made,the allowance for uncollectible accounts will be:

Accepted Answer

The answer of Y Company obtained the following balances from...

Question 6

At December 31,2011 a company's Accounts receivable balance was $12,600 and its Allowance for uncollectible accounts was $(1,000).
Part A: Show the effect of the following events on the accounting equation,including both account titles and amounts.
Part B: Select the column which represents the 2012 financial statement where the item will appear,and fill in the correct dollar amount.

Accepted Answer

The answer of At December 31,2011 a company's Accounts receivable...

Question 7

A positive balance in the allowance for uncollectible accounts before an adjusting entry for bad debts expense is recorded means management understated its bad debts expense in the prior period.

Accepted Answer

A positive balance in the allowance for uncollectible accounts means that more money was reserved for bad debts than was actually written off as uncollectible in the prior period, indicating that bad debts expense was understated.

Question 8

On July 31,the accountant for Team Shirts was reviewing items related to accounts receivable.The following information was gathered for July.Credit sales for July were $13,700.Bad debts are estimated to be 3% of sales.The unadjusted balance in the Allowance for uncollectible accounts is $(750).
1.What is the amount of bad debts expense for July and on which financial statement is it found?
2.What will be the amount in the Allowance for uncollectible accounts at July 31 and on which financial statement is it found?

Accepted Answer

The answer of On July 31,the accountant for Team Shirts...

Question 9

Bad debts on the income statement will always equal the balance in the allowance for uncollectible accounts on the balance sheet.

Accepted Answer

Bad debts on the income statement represent the actual amount of accounts receivable that the company has determined are uncollectible during the period. The balance in the allowance for uncollectible accounts, on the other hand, represents the estimated amount of accounts receivable that the company believes will ultimately be uncollectible based on past experience and other factors. While the two amounts may be related, they are not always equal.

Question 10

The allowance method provides a good match between the revenue (sale)and the bad debts expense,because the write-off is matched directly with the sale.

Accepted Answer

The allowance method estimates and records the bad debts expense in the same period as the sale is made. The write-off is then matched directly with the sale, providing a good match between revenue and bad debts expense.

Question 11

Z Company obtained the following balances from its computerized accounting information system at the end of the year before adjustments:  The company estimates that 2% of net sales will be uncollectible.After the correct adjusting entry has been made,what is the net accounts receivable on the year-end balance sheet?

Accepted Answer

The answer of Z Company obtained the following balances from...

Question 12

Y Company obtained the following balances from its computerized accounting information system at the end of the year before adjustments:  The company estimates that 20% of accounts receivable will be uncollectible.After the correct adjusting entry has been made,the allowance for uncollectible accounts will be:

Accepted Answer

The answer of Y Company obtained the following balances from...

Question 13

Y Company obtained the following balances from its computerized accounting information system at the end of the year before adjustments:  The company estimates that 2% of net sales will be uncollectible.After the correct adjusting entry has been made,what is the net accounts receivable on the year-end balance sheet?

Accepted Answer

The net accounts receivable can be calculated by subtracting the estimated uncollectible amount from the accounts receivable balance. 2% of net sales is estimated to be uncollectible, and the net sales are not given. Therefore, we cannot determine the gross accounts receivable. However, we are given the accounts receivable balance before adjustments, which is $26,000. If we subtract 2% of net sales, we get $25,300, which is the net accounts receivable after adjustments that should be reported on the balance sheet.

Question 14

Y Company obtained the following balances from its computerized accounting information system at the end of the year before adjustments:  The company estimates that 20% of accounts receivable will be uncollectible.After the correct adjusting entry has been made,bad debts expense for the year will be:

Accepted Answer

The answer of Y Company obtained the following balances from...

Question 15

It is realistic for a firm to assume that 100% of accounts receivable will be collected.

Accepted Answer

It is not realistic for a firm to assume that 100% of accounts receivable will be collected. It is common for some customers to default on payments or for some invoices to become uncollectible. Therefore, firms should factor in a certain percentage of bad debt expense when estimating their accounts receivable collections.

Question 16

The direct write-off method provides a good match between the revenue (sale)and the bad debts expense,because the write-off is matched directly with the sale.

Accepted Answer

The direct write-off method does not provide a good match between revenue and bad debts expense because it recognizes bad debts expense only when specific accounts are deemed uncollectible, which could be in a different period from when the revenue was recognized.

Question 17

The allowance method is preferred over the direct write-off method because it better matches the expense of bad debts in the same period as the related sale.

Accepted Answer

The statement is true. The allowance method estimates the amount of bad debt expense and creates a contra asset account (allowance for doubtful accounts) to reflect the estimated amount of uncollectible accounts. This method matches the expense with the period in which the related sale occurs, whereas the direct write-off method does not match the expense with the period of the sale.

Question 18

Z Company obtained the following balances from its computerized accounting information system at the end of the year before adjustments:  The company estimates that 2% of net sales will be uncollectible.After the correct adjusting entry has been made,the allowance for uncollectible accounts will be:

Accepted Answer

The answer of Z Company obtained the following balances from...

Question 19

Corporations use the allowance method because it is required by GAAP.

Accepted Answer

The allowance method is required by GAAP (Generally Accepted Accounting Principles) for corporations to estimate and record bad debt expenses.

Question 20

Discuss the importance of reporting net accounts receivable.

Accepted Answer

The answer of Discuss the importance of reporting net accounts...

Quiz 4: Payment for Goods and Services: Cash and Accounts Receivable

The allowance for uncollectible accounts is an expense on the income statements.

Bad debts expense is a contra-asset account on the balance sheet.

A positive balance in the allowance for uncollectible accounts before an adjusting entry for bad debts expense is recorded means management understated its bad debts expense in the prior period.

Bad debts on the income statement will always equal the balance in the allowance for uncollectible accounts on the balance sheet.

The allowance method provides a good match between the revenue (sale)and the bad debts expense,because the write-off is matched directly with the sale.

It is realistic for a firm to assume that 100% of accounts receivable will be collected.

The direct write-off method provides a good match between the revenue (sale)and the bad debts expense,because the write-off is matched directly with the sale.

The allowance method is preferred over the direct write-off method because it better matches the expense of bad debts in the same period as the related sale.

Z Company obtained the following balances from its computerized accounting information system at the end of the year before adjustments: The company estimates that 2% of net sales will be uncollectible.After the correct adjusting entry has been made,the allowance for uncollectible accounts will be:

Corporations use the allowance method because it is required by GAAP.

Discuss the importance of reporting net accounts receivable.