Question 1

Determine the amount of the adjustment for bad debts given:
Bad debts are estimated to be 8% of sales
  $ ________

Accepted Answer

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Question 2

On December 31, 2010, Paint Pros had a balance in Accounts Receivable of $15,000. Net credit sales for the year were $450,000. The Allowance for Doubtful Accounts has a debit balance of $800. Journalize the recording of the bad debt expense under the balance sheet approach if $1,510 is the estimated amount of uncollectible accounts.

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Question 3

Determine the estimated realizable (collectable)value:
Bad debts are estimated to be 3% of net sales.
  $ ________

Accepted Answer

The answer of Determine the estimated realizable (collectable)value:
Bad debts are...

Question 4

The general ledger controlling account for Accounts Receivable shows a debit balance of $120,000. The Allowance for Doubtful Accounts has a credit balance of $5,000. An aging report of accounts receivable accounts resulted in an estimate of $23,000 of uncollectible accounts receivable. Calculate the amount of the adjustment using the balance sheet approach.
Amount of the adjustment ________

Accepted Answer

The answer of The general ledger controlling account for Accounts...

Question 5

Colleen's account was written off for $800. She received an inheritance from her uncle and wants to clear her account. The entry to record this is to:

Accepted Answer

The best choice is to debit Accounts Receivable/Maggie, credit Allowance for Doubtful Accounts, debit Cash, and credit Accounts Receivable/Maggie. This entry will clear Colleen's account by reducing her accounts receivable and increasing her cash. Since her account was previously written off, the allowance for doubtful accounts will also need to be credited to reduce the balance.

Question 6

The Allowance for Doubtful Accounts has a credit balance of $4,000. Net sales for the year were $800,000. Two percent is the estimated uncollectible based on net sales. Calculate the amount of the adjustment using the income statement approach.
Amount of the adjustment ________

Accepted Answer

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Question 7

If the allowance method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?

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Question 8

Empire has a credit balance of $750 in its Allowance for Doubtful Accounts. The balance it the Accounts Receivable account is $80,500, with $2,415 estimated to be uncollectible after aging the accounts. Under the balance sheet approach, the debit to Bad Debt Expense will be:

Accepted Answer

The balance sheet approach to estimating bad debt expense requires a calculation based on the ending balance in the Allowance for Doubtful Accounts. The formula is: 
Ending Allowance for Doubtful Accounts = Beginning Balance + Bad Debt Expense - Write-Offs - Recoveries

We know the ending balance in the Allowance for Doubtful Accounts is $750. We also know the write-offs for the period are $2,415. We can calculate the beginning balance as:

Beginning Balance = Ending Balance - Bad Debt Expense + Write-Offs - Recoveries 
Beginning Balance = $750 - Bad Debt Expense + $2,415 - $0 
Beginning Balance = $3,165 - Bad Debt Expense

And we know the balance in the Accounts Receivable account is $80,500, with $2,415 estimated to be uncollectible. This means the estimated percentage of uncollectible accounts is:

Estimated % of Uncollectibles = (Estimated Uncollectibles / Accounts Receivable Balance) x 100 
Estimated % of Uncollectibles = ($2,415 / $80,500) x 100 
Estimated % of Uncollectibles = 3%

Using the balance sheet approach, we want to set the ending balance in the Allowance for Doubtful Accounts to be 3% of the ending balance in the Accounts Receivable account. So:

Ending Allowance for Doubtful Accounts = 3% x $80,500 
Ending Allowance for Doubtful Accounts = $2,415

Now we can solve for Bad Debt Expense:

Ending Allowance for Doubtful Accounts = Beginning Balance + Bad Debt Expense - Write-Offs - Recoveries 
$2,415 = $750 - Bad Debt Expense + $2,415 - $0 
$2,415 = $3,165 - Bad Debt Expense 
$750 = Bad Debt Expense

Therefore, the debit to Bad Debt Expense will be $750. Option D is incorrect because it only represents the beginning balance in the Allowance for Doubtful Accounts, and does not take into account the estimated uncollectibles and write-offs for the period.

Question 9

After aging the Accounts Receivable, it is estimated that $2,450 will not be collected and the allowance account has an existing debit balance of $300. If Accounts Receivable is $107,000, the net receivables would be:

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Question 10

Prepare the adjusting journal entry for Bad Debts Expense from the following information using the balance sheet approach.

Accepted Answer

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Question 11

As the past due time increases for an account, the likelihood of collecting that account:

Accepted Answer

As the past due time increases, the likelihood of collecting that account usually goes down. This is due to the fact that the longer an account is past due, the more difficult it becomes to collect, as the customer may have already forgotten about the debt or may be experiencing financial difficulties.

Question 12

Determine the amount of the adjustment for bad debts given:
Bad debts are estimated to be 4% of sales
  $ ________

Accepted Answer

The answer of Determine the amount of the adjustment for...

Question 13

Determine the estimated realizable (collectable)value:
Bad debts are estimated to be 1% of receivables
  $ ________

Accepted Answer

The answer of Determine the estimated realizable (collectable)value:
Bad debts are...

Question 14

If the allowance method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible?

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Question 15

Prepare the adjusting journal entry of Bad Debts Expense from the following information using the income statement approach.

Accepted Answer

The answer of Prepare the adjusting journal entry of Bad...

Question 16

A detailed analysis of Accounts Receivable to determine how long each account has been outstanding is called:

Accepted Answer

Aging the Accounts Receivable involves categorizing each account based on how long it has been outstanding. This helps the company identify which accounts are more likely to become uncollectible and take appropriate action to collect them. Analyzing the Accounts Receivable is a more general term and does not specifically refer to aging. Aging the uncollectible accounts is a step that comes after aging the Accounts Receivable to identify the specific accounts that are uncollectible. Taking a percentage of sales on account is a method of estimating the amount of uncollectible accounts, but it does not involve analyzing the age of the accounts.

Question 17

Determine the amount of the adjustment for bad debts given:
Bad debts are estimated to be 6% of receivables
  $ ________

Accepted Answer

The answer of Determine the amount of the adjustment for...

Question 18

A notice was received from Mary, who is a customer, that she was bankrupt. The entry to write-off her balance of $1,250 would be:

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Question 19

After aging the receivables, Tim's Toys estimates that $900 will not be collected and the allowance account has a debit balance of $325. The adjusting entry would be for:

Accepted Answer

The adjusting entry for an allowance for uncollectible accounts with a debit balance is to credit the account for the estimated amount that will not be collected. The total estimated amount that will not be collected is $900, and the current debit balance is $325, so the adjusting entry would be a credit to the allowance account for $1,225 (900 + 325).

Question 20

Evaluate the differences of the effect on the financial statements between the income statement approach and the balance sheet approach for estimating bad debts expense on the financial statement presentation.

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Quiz 13: Accounting for Bad Debts

Determine the amount of the adjustment for bad debts given: Bad debts are estimated to be 8% of sales $ ________

Determine the estimated realizable (collectable)value: Bad debts are estimated to be 3% of net sales. $ ________

Colleen's account was written off for $800. She received an inheritance from her uncle and wants to clear her account. The entry to record this is to:

The Allowance for Doubtful Accounts has a credit balance of $4,000. Net sales for the year were $800,000. Two percent is the estimated uncollectible based on net sales. Calculate the amount of the adjustment using the income statement approach. Amount of the adjustment ________

If the allowance method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?

Empire has a credit balance of $750 in its Allowance for Doubtful Accounts. The balance it the Accounts Receivable account is $80,500, with $2,415 estimated to be uncollectible after aging the accounts. Under the balance sheet approach, the debit to Bad Debt Expense will be:

After aging the Accounts Receivable, it is estimated that $2,450 will not be collected and the allowance account has an existing debit balance of $300. If Accounts Receivable is $107,000, the net receivables would be:

Prepare the adjusting journal entry for Bad Debts Expense from the following information using the balance sheet approach.

As the past due time increases for an account, the likelihood of collecting that account:

Determine the amount of the adjustment for bad debts given: Bad debts are estimated to be 4% of sales $ ________

Determine the estimated realizable (collectable)value: Bad debts are estimated to be 1% of receivables $ ________

If the allowance method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible?

Prepare the adjusting journal entry of Bad Debts Expense from the following information using the income statement approach.

A detailed analysis of Accounts Receivable to determine how long each account has been outstanding is called:

Determine the amount of the adjustment for bad debts given: Bad debts are estimated to be 6% of receivables $ ________

A notice was received from Mary, who is a customer, that she was bankrupt. The entry to write-off her balance of $1,250 would be:

After aging the receivables, Tim's Toys estimates that $900 will not be collected and the allowance account has a debit balance of $325. The adjusting entry would be for:

Evaluate the differences of the effect on the financial statements between the income statement approach and the balance sheet approach for estimating bad debts expense on the financial statement presentation.