Reference no: EM13604845
1.The balance in accounts receivable at the beginning of 2011 was $600. During 2011, $3,200 of credit Sales were recorded. If the ending balance in accounts receivable was $500 and $200 in accounts receivable were written off during the year, the amount of cash collected from customers was
a) $3,100
b) $3,200
c) $3,300
d) $3,800
2.A company uses the allowance method to account for bad debts. What is the effect on each of the following accounts of the collection of an account previously written off?Allowance for Bad Debt Uncollectible Accounts Expense
a) Increase Decrease
b) No effect Decrease
c) Increase No Effect
d) No effect No effect
3.West Company: Amount to charge to bad debt expense under two methods.West Company had the following account balances at December 31, 2011 before recording bad debt expense for the year:
-Accounts receivable $900,000
-Allowance for uncollectible accounts (credit balance) 16,000
-Credit Sales for 2011 1,750,000
West is considering the following methods of estimating bad debts for 2011:
- Based on 2% of credit sales
- Based on 5% of year-end accounts receivable
4.What amount should West charge to bad debt expense at the end of 2011 under each method?
Percentage of Credit Sales Percentage of Accounts Receivable
a. $35,000 $29,000
b. $35,000 $45,000
c. $51,000 $29,000
d. $51,000 $45,000
5.Bad debt expense must be estimated in order to satisfy the matching principle where expenses are recorded in the same periods as the related revenues. In estimating the provision for doubtful accounts for a period, companies generally accrue
a. either an amount based on a percentage of total sales or an amount based on a percentage of accounts receivable after adjusting for any balance in the allowance for doubtful accounts
b. a percentage of accounts receivable transactions for the period
c. a percentage of total sales
d. either an amount based on a percentage of credit sales or an amount based on a percentage of accounts receivable after adjusting for any balance in the allowance for doubtful accounts.The next 2 questions are based on the following information:
6.Madison Corporation uses the allowance method to value its accounts receivable and is making the annual adjustments at fiscal year-end, November 30. The proportion of uncollectible accounts is estimated based on past experience, which indicates 1.5% of net credit sales will be uncollectible. Total sales for the year were $2,000,000, of which $200,000 were cash transactions. Madison has determined that the Norris Corporation accounts receivable balance of $10,000 is uncollectible and will write off this account before year-end adjustments are made. Listed below are Madison's account balances at November 30 prior to any adjustments and the $10,000 write-off.
- Sales $2,000,000
- Accounts receivable 750,000
- Sales discounts 125,000
- Allowance for doubtful accounts 16,500
- Sales returns and allowances 175,000
- Bad debt expense 0
1)The entry to write off Norris Corporation's accounts receivable balance of $10,000 will
a. Increase total assets and decrease net income.
b. Decrease total assets and net income.
c. Have no effect on total assets and decrease net income.
d. Have no effect on total assets and net income.
2) As a result of the November 30 adjusting entry to provide for bad debts, the allowance for doubtful accounts will
a.Increase by $30,000.
b.Increase by $25,500.
c.Increase by $22,500.
d.Decrease by $22,500.