Question 1

Using the accounts receivable aging method,estimated uncollectible accounts are $50,000.If the balance of the Allowance for Uncollectible Accounts is an $18,000 debit before adjustment,what is the balance after adjustment?

Accepted Answer

The answer of Using the accounts receivable aging method,estimated uncollectible...

Question 2

The goal of a successful credit policy is to maximize the potential profit on total credit sales while

Accepted Answer

The goal of a successful credit policy is to maximize profit, but not at the expense of incurring high credit losses. Therefore, limiting credit losses to an acceptable level is a priority. Minimizing the number of credit customers or keeping credit sales low may also limit credit losses, but it could also limit potential profits. Selling only to customers who will pay is a good practice, but it does not necessarily maximize profit on total credit sales.

Question 3

Use this information to answer the following question. The general ledger account for Accounts Receivable shows a debit balance of $50,000.Allowance for Uncollectible Accounts has a credit balance of $1,000.Net sales for the year were $500,000.In the past,2 percent of sales have proved uncollectible,and an aging of accounts receivable accounts results in an estimate of $13,500 of uncollectible accounts.
Using the accounts receivable aging method,the Allowance for Uncollectible Accounts balance (after adjustment)would be

Accepted Answer

Using the accounts receivable aging method, the estimated amount of uncollectible accounts is $13,500. This amount should be added to the existing credit balance in the Allowance for Uncollectible Accounts account. Therefore, the new balance after adjustment would be $14,500 ($1,000 + $13,500), which is choice A.

Question 4

The matching rule

Accepted Answer

The matching rule requires that expenses be matched with the revenues that they helped to generate, which means that bad debt expenses should be recorded in the same period as the sales that led to the possibility of bad debts. This necessitates the recording of an estimated amount for bad debts, as it is impossible to know which specific sales will ultimately result in bad debts.

Question 5

Which of the following methods of recording uncollectible accounts expense would be described best as an income statement method?

Accepted Answer

The percentage of net sales method is an income statement method because it calculates the uncollectible accounts expense as a percentage of net sales. This method is used to estimate bad debt expense for the period based on the percentage of sales that are expected to be uncollectible. The other methods listed (direct charge-off method and accounts receivable aging method) are balance sheet methods because they focus on the balance in the allowance for doubtful accounts account rather than the current period's expense.

Question 6

The matching rule relates to credit losses by stating that Uncollectible Accounts Expense should be recorded

Accepted Answer

The matching principle in accounting dictates that expenses should be recorded in the same period as the revenues they help to generate. Therefore, Uncollectible Accounts Expense, which arises from sales on credit, should be recorded in the period of the sale to match the expense with the revenue it helped generate.

Question 7

Which of the following methods of recording uncollectible accounts expense would be described best as a balance sheet method?

Accepted Answer

The accounts receivable aging method is a balance sheet method because it focuses on estimating the ending balance of the allowance for doubtful accounts on the balance sheet, rather than the expense on the income statement. It involves analyzing the age of each accounts receivable account and calculating an estimated percentage of uncollectible accounts based on that age. This percentage is then applied to the total accounts receivable balance to calculate the estimated ending balance of the allowance for doubtful accounts.

Question 8

Using the percentage of net sales method,uncollectible accounts expense for the year is estimated to be $54,000.If the balance of the Allowance for Uncollectible Accounts is an $18,000 credit before adjustment,what is the balance after adjustment?

Accepted Answer

The answer of Using the percentage of net sales method,uncollectible...

Question 9

Use this information to answer the following question. The general ledger account for Accounts Receivable shows a debit balance of $50,000.Allowance for Uncollectible Accounts has a credit balance of $1,000.Net sales for the year were $522,000.In the past,2 percent of sales have proved uncollectible,and an aging of accounts receivable accounts results in an estimate of $13,500 of uncollectible accounts.
Using the percentage of net sales method,Uncollectible Accounts Expense would be debited for

Accepted Answer

To calculate the Uncollectible Accounts Expense using the percentage of net sales method, we use the formula:
Net Sales x Percentage of Uncollectible Accounts
Percentage of Uncollectible Accounts = 2% (given in the problem)
Net Sales = $522,000

Uncollectible Accounts Expense = $522,000 x 2% = $10,440

Therefore, the correct answer is D, $10,440.

Question 10

Under the allowance method,Uncollectible Accounts Expense is recorded

Accepted Answer

Under the allowance method, Uncollectible Accounts Expense is recorded for an estimated amount based on the expected percentage of uncollectible accounts. It is recorded at the end of the accounting period as an adjusting entry.

Question 11

Use this information to answer the following question. The general ledger account for Accounts Receivable shows a debit balance of $50,000.Allowance for Uncollectible Accounts has a credit balance of $1,000.Net sales for the year were $500,000.In the past,2 percent of sales have proved uncollectible,and an aging of accounts receivable accounts results in an estimate of $17,900 of uncollectible accounts.
Using the accounts receivable aging method,the Allowance for Uncollectible Accounts balance (after adjustment)would be

Accepted Answer

The answer of Use this information to answer the following...

Question 12

The allowance for uncollectible accounts is necessary because

Accepted Answer

The allowance for uncollectible accounts is necessary because it is not possible to predict specifically which accounts will not be collected when recording uncollectible accounts expense. This allowance is an estimated amount of uncollectible accounts that a company expects to incur based on their historical experience and current economic conditions. It is used to match the expenses of uncollectible accounts with the sales they generated.

Question 13

The account Allowance for Uncollectible Accounts is classified as a(n)

Accepted Answer

The Allowance for Uncollectible Accounts is a contra account to Accounts Receivable. It is used to record and estimate the amount of accounts receivable that are not expected to be collected. This contra account reduces the overall balance of Accounts Receivable, and is reported on the balance sheet as a deduction from the total amount of Accounts Receivable.

Question 14

The balance in Allowance for Uncollectible Accounts must be considered prior to end-of-period adjustment when using which of the following methods?

Accepted Answer

The answer of The balance in Allowance for Uncollectible Accounts...

Question 15

Use this information to answer the following question. The general ledger account for Accounts Receivable shows a debit balance of $50,000.Allowance for Uncollectible Accounts has a credit balance of $1,000.Net sales for the year were $465,000.In the past,2 percent of sales have proved uncollectible,and an aging of accounts receivable accounts results in an estimate of $13,500 of uncollectible accounts.
Using the percentage of net sales method,the Allowance for Uncollectible Accounts balance (after adjustment)would be

Accepted Answer

The answer of Use this information to answer the following...

Question 16

All of the following bank reconciliation items would result in a journal entry on the company's books except

Accepted Answer

Deposits in transit do not require a journal entry because they are already recorded on the company's books. The other items require journal entries to reflect the changes in the company's accounts. Interest income would be added to revenue, a fee for collection of a note by the bank would be charged as an expense, and an NSF check would reduce accounts receivable.

Question 17

Which of the following account names should not be used in modern practice?

Accepted Answer

"Reserve for Bad Debts" is an outdated term that is no longer commonly used in modern accounting practice. The more appropriate term is "Allowance for Bad Debts" or "Allowance for Doubtful Accounts." "Uncollectible Accounts Expense" is also an acceptable term.

Question 18

For which of the following errors should the appropriate amount be added to the balance per bank on a bank reconciliation?

Accepted Answer

The answer of For which of the following errors should...

Question 19

Which of the following bank reconciliation items would result in a journal entry on the company's books?

Accepted Answer

The answer of Which of the following bank reconciliation items...

Question 20

If the amount of uncollectible accounts expense is overstated at year end,

Accepted Answer

If the uncollectible accounts expense is overstated at year end, it means that the allowance for uncollectible accounts has been overestimated, leading to an understatement of net accounts receivable. This is because the allowance for uncollectible accounts is deducted from accounts receivable to arrive at the net accounts receivable balance. The overstatement of the uncollectible accounts expense will not impact total liabilities and stockholders' equity, and it will lead to an understatement of net income due to the higher expense.

Quiz 7: Cash and Receivables