Question 1

Millie's Draperies uses the allowance method of recording bad debts.On June 13,the $200 account balance of Jane Murphy was charged off.However,on August 5,Murphy paid $80 of the amount previously written off.The entry to record the payment from Murphy would include:

Accepted Answer

Since the allowance method was used to record the bad debt, Jane Murphy's account balance was written off as uncollectible and the allowance for doubtful accounts was credited for the same amount. When Murphy pays $80 of the previously written off amount, we need to reverse the entry made on June 13th. This means we need to debit the accounts receivable and credit the allowance for doubtful accounts for the same amount. Therefore, the correct entry is: debit Accounts Receivable $80;credit Allowance for Doubtful Accounts $80.

Question 2

On December 31,prior to adjustments,the balance of Accounts Receivable is $52,000 and Allowance for Doubtful Accounts has a debit balance of $600.The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year.The adjusting entry needed to record the estimated losses from uncollectible accounts is made for

Accepted Answer

The estimated uncollectible accounts are 5% of $52,000, which is $2,600. Since the Allowance for Doubtful Accounts has a debit balance of $600, the adjusting entry should be for $3,200 to bring the allowance to the required credit balance of $2,600.

Question 3

Millie's Draperies uses the allowance method of recording bad debts.On June 13,the company concluded that the $200 account balance of Jane Murphy should be charged off.The entry to write off Murphy's account will be:

Accepted Answer

The answer of Millie's Draperies uses the allowance method of...

Question 4

Uncollectible Accounts Expense is classified as

Accepted Answer

Uncollectible Accounts Expense is an expense account that is reported on the income statement to recognize the estimated loss from uncollectible accounts receivable. It represents the amount of sales that a company does not expect to collect on, and therefore is not a contra asset, liability, or expense on the balance sheet.

Question 5

On December 31,prior to adjustments,the balance of Accounts Receivable is $26,000 and Allowance for Doubtful Accounts has a debit balance of $300.The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year.The adjusting entry needed to record the estimated losses from uncollectible accounts is made for

Accepted Answer

The estimated uncollectible amount is 5% of $26,000, which is $1,300. Since the Allowance for Doubtful Accounts has a debit balance of $300, the adjusting entry should be $1,300 + $300 = $1,600 to bring the allowance to the correct credit balance.

Question 6

On December 31,2016,prior to adjustments,Accounts Receivable has a debit balance of $356,000 and the Allowance for Doubtful Accounts has a credit balance of $1,200.The firm estimates its losses from uncollectible accounts to be 4% of accounts receivable at the end of the year.The amount of the adjusting entry needed to record the estimated losses from uncollectible accounts is:

Accepted Answer

The estimated losses from uncollectible accounts are 4% of $356,000, which equals $14,240. Since there is already a credit balance of $1,200 in the Allowance for Doubtful Accounts, the adjusting entry needed is $14,240 - $1,200 = $13,040.

Question 7

Nigel Lighting uses the direct charge-off method of recording bad debts.On Sept.4,the $300 account balance of Louis Blue was charged off.However,on November 15,Blue paid $70 of the amount previously written off.The entry to record the payment from Blue would include:

Accepted Answer

Since Nigel Lighting uses the direct charge-off method, the initial entry to record the write-off of Louis Blue's $300 account balance would be:

Debit Uncollectible Account Expense $300
Credit Accounts Receivable $300

When Louis Blue pays $70 on November 15, the entry to record the payment would be:

Debit Cash $70
Credit Accounts Receivable $70

This is because the amount previously written off was $300 and the payment received was only $70, so the remaining balance of $230 is still uncollectible and should not be added back to Accounts Receivable. Choice D correctly reflects this entry.

Question 8

Nigel Lighting uses the direct charge-off method of recording bad debts.On September 4,the company concluded that the $300 account balance of Louis Blue should be charged off.The entry to write off Blue's account will be:

Accepted Answer

The answer of Nigel Lighting uses the direct charge-off method...

Question 9

Allowance for Doubtful Accounts has a credit balance of $1,000 immediately before the write-off of a $300 account receivable.The credit balance of Allowance for Doubtful Accounts immediately after the write-off is

Accepted Answer

Before the write-off, the credit balance of Allowance for Doubtful Accounts was $1,000. After the write-off of $300, the new balance in the Allowance for Doubtful Accounts is $700 ($1,000 - $300). Therefore, the correct answer is A.

Question 10

A firm using the allowance method to provide for losses from uncollectible accounts collected the cash due from a customer whose account was previously written off.The entry to reinstate the customer's account included a credit to

Accepted Answer

The entry to reinstate a previously written-off account involves debiting Accounts Receivable and crediting Allowance for Doubtful Accounts, as this reverses the write-off and restores the account to its original state.

Question 11

When a firm uses the allowance method to provide for losses for uncollectible accounts,the collection of an account previously written off as uncollectible requires an entry to

Accepted Answer

When a previously written off account is collected, the firm needs to reinstate the account receivable by making an entry to reflect the collection of the receivable. This is because the allowance method creates a contra asset account called "Allowance for Doubtful Accounts" that reduces the balance of the accounts receivable account, which includes any accounts written off as uncollectible. Therefore, to reflect the collection of a previously written off account, the accounts receivable account needs to be increased by the amount collected through a reinstatement entry.

Question 12

On December 31,2016,prior to adjustments,Accounts Receivable has a debit balance of $356,000 and the Allowance for Doubtful Accounts has a credit balance of $1,200.The firm estimates its losses from uncollectible accounts to be 4% of accounts receivable at the end of the year.The balance in the Allowance for Doubtful Accounts after the adjusting entry for the estimated losses from uncollectible accounts is:

Accepted Answer

The estimated uncollectible amount is 4% of $356,000, which is $14,240. The existing credit balance in the Allowance for Doubtful Accounts is $1,200. Therefore, the adjusting entry needed is $14,240 - $1,200 = $13,040. After the adjustment, the balance in the Allowance for Doubtful Accounts will be $14,240.

Question 13

Allowance for Doubtful Accounts has a credit balance of $2,000 immediately before the write-off of a $600 account receivable.The balance of Allowance for Doubtful Accounts immediately after the write-off is

Accepted Answer

The Allowance for Doubtful Accounts is a contra-asset account that is used to reduce the value of accounts receivable that are considered to be uncollectible. When an account receivable is written off, the Allowance for Doubtful Accounts is increased by the amount of the write-off. In this case, the Allowance for Doubtful Accounts has a credit balance of $2,000 before the write-off, and the account receivable that is written off is $600. Therefore, the balance of the Allowance for Doubtful Accounts after the write-off is $2,000 + $600 = $2,600.

Question 14

On December 31,prior to adjustment,Allowance for Doubtful Accounts has a debit balance of $800.An aging of the accounts receivable produces an estimate of $5,200 of probable losses from uncollectible accounts.The adjusting entry needed to record the estimated losses from uncollectible accounts is made for

Accepted Answer

The Allowance for Doubtful Accounts needs to have a credit balance of $5,200 after adjustment. Since it currently has a debit balance of $800, the adjusting entry must be for $6,000 to offset the debit and achieve the desired credit balance.

Question 15

When the allowance method of recognizing losses from uncollectible accounts is used,the entry to record the write-off of a specific account consists of a debit to

Accepted Answer

When using the allowance method, the write-off of a specific account is recorded by debiting Allowance for Doubtful Accounts and crediting Accounts Receivable, as the expense was already estimated and recorded previously.

Question 16

On December 31,2016,prior to adjustments,Accounts Receivable has a debit balance of $370,000 and the Allowance for Doubtful Accounts has a credit balance of $400.The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year.The amount of the adjusting entry needed to record the estimated losses from uncollectible accounts is

Accepted Answer

To find the estimated losses from uncollectible accounts, we need to multiply the ending balance of accounts receivable by the estimated percentage of uncollectible accounts.
$370,000 x 5% = $18,500

However, we also need to take into account the current balance in the Allowance for Doubtful Accounts. Since the balance is a credit, we need to subtract it from the estimated losses to find the necessary adjustment.
$18,500 - $400 = $18,100

Therefore, the adjusting entry needed is $18,100. Choice letter A is the best option.

Question 17

On December 31,prior to adjustments,the balance of Accounts Receivable is $32,000 and Allowance for Doubtful Accounts has a credit balance of $190.The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year.The adjusting entry needed to record the estimated losses from uncollectible accounts is made for

Accepted Answer

To calculate the estimated losses from uncollectible accounts, we need to multiply the Accounts Receivable balance by the estimated percentage of uncollectible accounts. 
$32,000 x 5% = $1,600

Since we already have a credit balance of $190 in the Allowance for Doubtful Accounts, we only need to adjust by the difference: 
$1,600 - $190 = $1,410

Therefore, the adjusting entry needed to record the estimated losses from uncollectible accounts is $1,410, which is option B.

Question 18

On December 31,2016,prior to adjustments,Accounts Receivable has a debit balance of $356,000 and the Allowance for Doubtful Accounts has a debit balance of $1,200.The firm estimates its losses from uncollectible accounts to be 4% of accounts receivable at the end of the year.The amount of the adjusting entry needed to record the estimated losses from uncollectible accounts is:

Accepted Answer

The answer of On December 31,2016,prior to adjustments,Accounts Receivable has...

Question 19

Common internal controls for accounts receivable would not include:

Accepted Answer

Allowing all sales personnel to charge-off any accounts deemed uncollectible would not be a common internal control for accounts receivable. This is because it could lead to possible fraud or errors in recording bad debt expenses. Instead, there should be specific procedures and approval processes in place for writing off uncollectible accounts. The other choices are all common internal control measures for accounts receivable.

Question 20

On December 31,prior to adjustments,the balance of Accounts Receivable is $16,000 and Allowance for Doubtful Accounts has a credit balance of $95.The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year.The adjusting entry needed to record the estimated losses from uncollectible accounts is made for

Accepted Answer

To record the estimated losses, we need to create a debit entry in the Allowance for Doubtful Accounts and a credit entry in the Bad Debt Expense account. The estimated losses are 5% of the year-end Accounts Receivable balance, which is $16,000. Therefore, the estimated losses would be $800 ($16,000 x 0.05). However, we already have a credit balance of $95 in the Allowance for Doubtful Accounts, which means we only need to increase the allowance by the difference between the estimated losses and the current credit balance. So, the adjusting entry would be to debit Bad Debt Expense for $705 ($800 - $95) and credit Allowance for Doubtful Accounts for $705. Therefore, the correct answer is A) $705.

Quiz 15: Accounts Receivable and Uncollectible Accounts