Question 1

A company reports net accounts receivable of $152,000 on its 31 December 2016 balance sheet.The Allowance for doubtful debts has a credit balance of $20,000.What is the balance in Accounts receivable?

Accepted Answer

The net accounts receivable is calculated as the gross accounts receivable minus the allowance for doubtful debts. Therefore, if the net accounts receivable is $152,000 and the allowance for doubtful debts is $20,000, the gross accounts receivable (balance in Accounts receivable) would be $152,000 + $20,000 = $172,000.

Question 2

The following information is from the 2016 records of Armand Camera Shop: $\begin{array}{|l|l|}
\hline\text { Accounts receivable, } 31 \text { December } 2016 & \$ 45,000 \text { (debit) } \
\hline \text { Allowance for doubtful debts, 31 December 2016 } & \
\text { prior to adjustment } & 1500 \text { (debit) } \
\hline \text { Net credit sales for 2016 } & 178,000 \
\hline \text { Accounts written off as uncollectable during 2016 } & 16,000 \
\hline \text { Cash sales during 2016 } & 30,000\\hline
\end{array}$ Bad debts expense is estimated by the percentage of sales method.The management estimates that 4% of net credit sales will be uncollectable.Calculate the amount of bad debts expense for 2016.

Accepted Answer

The answer of The following information is from the 2016...

Question 3

The Allowance for doubtful debts has a credit balance of $8000 before the adjusting entry for bad debt expense.After analysing the accounts in the accounts receivable subsidiary ledger using the ageing method,the company's management estimates that uncollectable accounts will be $15,000.What will be the amount of bad debts expense reported on the income statement?

Accepted Answer

The bad debts expense is calculated as the difference between the estimated uncollectable accounts ($15,000) and the existing credit balance in the allowance for doubtful debts ($8,000), resulting in $7,000.

Question 4

The following information is from the 2016 records of Armand Camera Shop: $\begin{array}{|l|l|}
\hline 
\text { Accounts receivable, 31 December } 2016 &\$ 44,000 \text { (debit) }  \
\hline\begin{array}{l}\text { Allowance for doubtful debts, 31 December } 2016
\end{array} &\
\text { prior to adjustment } & 1400 \text { (debit) } \\hline \text { Net credit sales for } 2016 & 177,000 \
\hline \text { Accounts written off as uncollectable during 2016 } & 14,000 \
\hline \text { Cash sales during } 2016 & 26,000\
\hline
\end{array}$ Bad debts expense is estimated by the percentage of sales method.Management estimates that 5% of net credit sales will be uncollectable.The balance of the Allowance for doubtful debts after adjustment will be:

Accepted Answer

The answer of The following information is from the 2016...

Question 5

Accounts receivable has a balance of $8000 and the Allowance for doubtful debts has a credit balance of $450.The allowance method is used.What is the net realisable value after a $170 account receivable is written off?

Accepted Answer

The net realizable value is the accounts receivable balance minus the allowance for doubtful debts. After the $170 account receivable is written off, the accounts receivable balance becomes $7,830 ($8,000 - $170). The allowance for doubtful debts remains at $450. Therefore, the net realizable value is $7,830 - $450 = $7,380.

Question 6

The percentage of sales method calculates bad debts expense by analysing accounts receivable.

Accepted Answer

The percentage of sales method estimates bad debts expense based on a percentage of total sales, not by analyzing accounts receivable.

Question 7

Smart Art is a new establishment.During the first year,there were credit sales of $45,000 and collections of credit sales of $32,000.One account for $550 was written off.The company decided to use the percentage of sales method to account for bad debts expense and decided to use a factor of 2% for their year-end adjustment of bad debts expense.The ending balance in Allowance for doubtful debts account would be:

Accepted Answer

The bad debts expense is calculated as 2% of credit sales, which is $45,000 * 2% = $900. The account written off is $550. Therefore, the ending balance in the Allowance for Doubtful Debts account is $900 - $550 = $350.

Question 8

Accounts receivable has a balance of $31,000 and the Allowance for doubtful debts has a credit balance of $3100.The allowance method is used.What is the net realisable value before and after a $2400 Account receivable is written off?

Accepted Answer

The net realizable value is calculated as Accounts Receivable minus Allowance for Doubtful Debts. Before the write-off, it is $31,000 - $3,100 = $27,900. After writing off $2,400, both Accounts Receivable and Allowance for Doubtful Debts decrease by $2,400, so the net realizable value remains $27,900.

Question 9

A newly created design business called Smart Art is just finishing up its first year of operations.During the year,there were credit sales of $40,000 and collections of credit sales of $33,000.One account for $675 was written off.Smart Art uses the ageing method to account for bad debts expense.It has estimated $275 as uncollectable at year-end.At the end of the year,what is the ending balance in the Bad debts expense account?

Accepted Answer

Using the ageing method, Smart Art estimates a total uncollectable amount of $275. However, it also had to write off one account for $675 during the year. Therefore, the total bad debts expense for the year is $950 ($675 + $275). Since the question asks for the ending balance in the Bad debts expense account, we can assume that there was no beginning balance in this account. Therefore, the answer is D) $950.

Question 10

The Allowance for doubtful debts account has a credit balance of $8500 before the adjusting entry for bad debt expense.After analysing the accounts in the accounts receivable subsidiary ledger using the ageing method,the company's management estimates that uncollectable accounts will be $14,500.What will be the balance of the Allowance for doubtful debts reported on the balance sheet?

Accepted Answer

The balance of the Allowance for doubtful debts should be adjusted to the estimated uncollectable amount of $14,500 as per the ageing method analysis.

Question 11

The Allowance for doubtful debts account has a debit balance of $9000 before the adjusting entry for bad debt expense.After analysing the accounts in the accounts receivable subsidiary ledger,the company's management estimates that uncollectable accounts will be $13,000.What will be the amount of the adjustment in the Allowance for doubtful debts account?

Accepted Answer

The answer of The Allowance for doubtful debts account has...

Question 12

The following information is from the 2016 records of Armand Camera Shop: $\begin{array}{|l|l|}
\hline 
\text { Accounts receivable, 31 December } 2016 &\$ 45,000 \text { (debit) }  \
\hline\begin{array}{l}\text { Allowance for doubtful debts, 31 December } 2016
\end{array} &\
\text { prior to adjustment } & 1900 \text { (debit) } \\hline \text { Net credit sales for } 2016 & 178,000 \
\hline \text { Accounts written off as uncollectable during 2016 } & 19,000 \
\hline \text { Cash sales during } 2016 & 28,000\
\hline
\end{array}$ Bad debts expense is estimated by the ageing of accounts receivable method.Management estimates that $8000 of accounts receivable will be uncollectable.Calculate the Allowance for doubtful debts after the adjustment for bad debt expense at 31 December 2016.

Accepted Answer

The answer of The following information is from the 2016...

Question 13

The allowance method is a method of recording collection losses by estimating uncollectable amounts.

Accepted Answer

The allowance method is used to estimate and record collection losses by determining uncollectable amounts. This method involves creating a contra-asset account called "Allowance for Doubtful Accounts" to offset the accounts receivable balance and reflects the estimated amount of uncollectable accounts. Therefore, the statement is true.

Question 14

The ageing of accounts receivable method calculates bad debts expense as a percentage of net credit sales.

Accepted Answer

The ageing of accounts receivable method estimates bad debts based on the age of each account receivable, not as a percentage of net credit sales.

Question 15

A company has net credit sales of $1,200,000,beginning net accounts receivable of $260,000 and ending net accounts receivable of $203,000.What is the days' sales in receivables? Use a 365-day year.(Round to the nearest day. )

Accepted Answer

The formula for calculating days' sales in receivables is:
(Days in the period x Ending A/R balance) / Net credit sales

Days in the period = 365
Net credit sales = $1,200,000
Beginning net accounts receivable = $260,000
Ending net accounts receivable = $203,000

Days' sales in receivables = (365 x $203,000) / $1,200,000
Days' sales in receivables = 61.93

Rounded to the nearest day, the answer is 70 days (Choice C).

Question 16

Martin Sales provides the following information: Net credit sales: $800,000
Beginning net accounts receivable: $40,000
Ending net accounts receivable: $23,000
Calculate the accounts receivable turnover ratio.(Round to the nearest whole number. )

Accepted Answer

The accounts receivable turnover ratio is calculated as Net Credit Sales divided by Average Accounts Receivable. Average Accounts Receivable = ($40,000 + $23,000) / 2 = $31,500. Therefore, the turnover ratio is $800,000 / $31,500 ≈ 25 times.

Question 17

Smart Art is a new establishment.During the first year,there were credit sales of $40,000 and collections of credit sales of $35,000.One account for $650 was written off.The company decided to use the percentage of sales method to account for bad debts expense and decided to use a factor of 3% for their year-end adjustment of bad debts expense.At the end of the year,the balance of bad debts expense would be:

Accepted Answer

The answer of Smart Art is a new establishment.During the...

Question 18

The ageing of accounts method is a balance sheet approach of estimating bad debts.

Accepted Answer

The statement is true. The ageing of accounts method involves categorizing accounts receivable based on the length of time outstanding and determining the likelihood of non-payment. This method helps in estimating the amount of bad debts that should be recorded on the balance sheet.

Question 19

The percentage of sales method calculates bad debts expense as a percentage of net credit sales.

Accepted Answer

The answer of The percentage of sales method calculates bad...

Question 20

Days' sales in receivables is the ratio of average net accounts receivable to one day's sales.

Accepted Answer

The answer of Days' sales in receivables is the ratio...

Quiz 9: Receivables

A company reports net accounts receivable of $152,000 on its 31 December 2016 balance sheet.The Allowance for doubtful debts has a credit balance of $20,000.What is the balance in Accounts receivable?

Accounts receivable has a balance of $8000 and the Allowance for doubtful debts has a credit balance of $450.The allowance method is used.What is the net realisable value after a $170 account receivable is written off?

The percentage of sales method calculates bad debts expense by analysing accounts receivable.

Accounts receivable has a balance of $31,000 and the Allowance for doubtful debts has a credit balance of $3100.The allowance method is used.What is the net realisable value before and after a $2400 Account receivable is written off?

The allowance method is a method of recording collection losses by estimating uncollectable amounts.

The ageing of accounts receivable method calculates bad debts expense as a percentage of net credit sales.

A company has net credit sales of $1,200,000,beginning net accounts receivable of $260,000 and ending net accounts receivable of $203,000.What is the days' sales in receivables? Use a 365-day year.(Round to the nearest day. )

Martin Sales provides the following information: Net credit sales: $800,000 Beginning net accounts receivable: $40,000 Ending net accounts receivable: $23,000 Calculate the accounts receivable turnover ratio.(Round to the nearest whole number. )

The ageing of accounts method is a balance sheet approach of estimating bad debts.

The percentage of sales method calculates bad debts expense as a percentage of net credit sales.

Days' sales in receivables is the ratio of average net accounts receivable to one day's sales.