Question 1

Accounts Receivable has a balance of $4000,and the Allowance for Bad Debts has a credit balance of $430.The allowance method is used.What is the net realizable value of Accounts Receivable after a $170 account receivable is written off?

Accepted Answer

The net realizable value of Accounts Receivable after the write-off can be calculated as follows:

Accounts Receivable balance = $4,000
Less: Amount written off = $170
Adjusted Accounts Receivable balance = $3,830

Allowance for Bad Debts balance = $430 (credit balance)
Less: Amount of write-off = $170
Adjusted Allowance for Bad Debts balance = $260 (credit balance)

Net realizable value of Accounts Receivable = Adjusted Accounts Receivable balance - Adjusted Allowance for Bad Debts balance
= $3,830 - $260
= $3,570

Therefore, the correct answer is C.

Question 2

When accounting for uncollectible accounts under IFRS,the allowance method is used to accomplish the matching of bad debt expense to the sales of the period but not to report receivables at net realizable value.

Accepted Answer

When accounting for uncollectible accounts under IFRS, the allowance method is used to accomplish the matching of bad debt expense to the sales of the period and to report receivables at net realizable value.

Question 3

A company reports net accounts receivable of $152,000 on its December 31,2019 balance sheet.The Allowance for Bad Debts has a credit balance of $20,000.What is the balance of Accounts Receivable?

Accepted Answer

$152,000 + $20,000 = $172,000

Question 4

The entry to write off an account under the allowance method affects net income at the time of entry.

Accepted Answer

The entry to write off an account under the allowance method has no effect on net income at the time of entry.

Question 5

Under the allowance method,the entry to write off a receivable increases the amount of the Allowance for Bad Debts account.

Accepted Answer

The entry to write off a receivable decreases the amount of the Allowance for Bad Debts account.

Question 6

Jayson Enterprises uses the allowance method to account for uncollectible receivables.When an uncollectible account is written off,________.

Accepted Answer

When an uncollectible account is written off using the allowance method, it does not affect net income because the expense was already estimated and recorded in a prior period. The entry involves debiting the Allowance for Bad Debts and crediting Accounts Receivable.

Question 7

Which of the following is TRUE of the balance sheet presentation of the Allowance for Bad Debts?

Accepted Answer

The Allowance for Bad Debts is shown as a contra account related to accounts receivable on the balance sheet. This means that it is subtracted from accounts receivable to determine the net realizable value of accounts receivable.

Question 8

When using the allowance method,the write-off of a receivable ________.

Accepted Answer

The allowance method involves estimating uncollectible accounts at the end of each period, which affects the Allowance for Bad Debts account. When a specific account is deemed uncollectible and written off, it reduces the balance of the Allowance for Bad Debts account but does not affect net income or the net realizable value of accounts receivable directly at the time of write-off.

Question 9

The net realizable value of Accounts Receivable is calculated by subtracting Bad Debts Expense from Accounts Receivable.

Accepted Answer

The net realizable value of Accounts Receivable is calculated by subtracting the Allowance for Doubtful Accounts (not Bad Debts Expense) from Accounts Receivable.

Question 10

Bad Debt Expense is not debited when a company writes off an account receivable when using the allowance method because the company has already recorded the Bad Debt Expense as an adjusting entry.

Accepted Answer

Under the allowance method, Bad Debt Expense is estimated and recorded as an adjusting entry at the end of the accounting period, based on the likelihood of uncollectible accounts. When an account receivable is actually deemed uncollectible and written off, it is simply removing the balance of that account from the Accounts Receivable and the Allowance for Doubtful Accounts. Since the Bad Debt Expense has already been recorded as an adjusting entry, it does not need to be debited again when writing off an account receivable.

Question 11

Accounts Receivable has a balance of $33,000,and the Allowance for Bad Debts has a credit balance of $3300.The allowance method is used.What is the net realizable value of Accounts Receivable before and after a $2300 account receivable is written off?

Accepted Answer

11ea8873_d48e_db50_bb89_1d0b42965f48_TB5026_00

Question 12

When using the allowance method to account for uncollectible accounts receivable,companies estimate bad debt expense at the end of the period and then record an adjusting entry.

Accepted Answer

This is the correct process for using the allowance method. Companies estimate bad debt expense based on historical data or other factors, record it at the end of the period, and then adjust their allowance account accordingly. This helps to account for the possibility of customers not paying their bills, and ensures that the company's financial statements reflect a more accurate picture of their accounts receivable.

Question 13

On January 16,Half Circle Company sold $5,000 of merchandise to Arnold,on account.Half Circle could not collect cash from Arnold and wrote off the account.Prepare a journal entry to record the write-off,assuming Half Circle uses the allowance method.Omit explanation.

Accepted Answer

The answer of On January 16,Half Circle Company sold $5,000...

Question 14

After the December 31,2019 adjusting journal entries have been posted,Tri-State Distributors has the following account balances (all accounts have normal balances)are:
 $$\begin{array} { | l | l | } 
\hline \text { Account Title } & \text { Account Balance } \
\hline \text { Accounts Receivable } & \$ 240,000 \
\hline \text { Allowance for Bad Debts } & \$ 12,500 \
\hline \text { Bad Debts Expense } & \$ 14,500 \
\hline
\end{array}$$ Use this information to prepare,in good form,the Balance Sheet (partial)on December,31,2019.Include a proper heading.

Accepted Answer

The answer of After the December 31,2019 adjusting journal entries...

Question 15

To report accounts receivable at the appropriate amount on the balance sheet,a company determines an accurate estimate of uncollectible accounts and recognizes the associated bad debt expense.

Accepted Answer

This statement accurately describes the process of reporting accounts receivable on the balance sheet. The estimate of uncollectible accounts is necessary to reflect the true value of the accounts receivable, and the corresponding bad debt expense is recognized to account for the potential loss from uncollectible accounts.

Question 16

The Allowance for Bad Debts account ________.

Accepted Answer

The Allowance for Bad Debts account holds the estimated amount of uncollectible accounts, also known as the "pool of unknown bad debts." This account is used to record a portion of accounts receivable that is expected to be uncollectible. It is not a liability account, does not increase with a debit, and is not added to accounts receivable.

Question 17

After the December 31,2019 adjusting journal entries have been posted,Sinclair Enterprises has the following account balances (all accounts have normal balances): $$\begin{array} { | l | l | } 
\hline \text { Account Title } & \text { Account Balance } \
\hline \text { Accounts Receivable } & \$ 154,000 \
\hline \text { Allowance for Bad Debts } & \$ 4700 \
\hline \text { Bad Debts Expense } & \$ 8000 \
\hline
\end{array}$$ What is the net realizable as of December 21,2019?

Accepted Answer

The net realizable value of accounts receivable is calculated by subtracting the allowance for bad debts from the total accounts receivable. Therefore, $154,000 - $4,700 = $149,300.

Question 18

The entry to write off an account receivable under the allowance method will ________.

Accepted Answer

Writing off an account receivable under the allowance method involves reducing both the accounts receivable and the allowance for doubtful accounts. This action has no effect on net income because the expense was already recognized when the allowance was initially estimated.

Question 19

When using the allowance method,Allowance for Bad Debts is debited when an account receivable is written off.

Accepted Answer

When using the allowance method, the Allowance for Bad Debts account is used to estimate and record potential losses from uncollectible accounts. When an account is deemed uncollectible and written off, the accounts receivable account is debited and the Allowance for Bad Debts account is credited. This reflects the reduction in assets and the recognition of the estimated loss on the income statement.

Question 20

When a company uses the allowance method to measure bad debts,________.

Accepted Answer

When a company uses the allowance method to measure bad debts, the amount of bad debts expense is estimated at the end of the accounting period. This is done by estimating the amount of uncollectible accounts based on past experience and the current status of accounts receivable. The Allowance for Bad Debts account is used to record this estimated amount, and the Bad Debts Expense account is debited when an account is actually deemed uncollectible and written off. The normal balance in the Allowance for Bad Debts account is a credit, not a debit.

Quiz 9: Receivables