Question Details

CHAPTER 9 ACCOUNTING FOR RECEIVABLES MULTIPLE CHOICE QUESTIONS PART 6


MULTIPLE CHOICE QUESTIONS


81. When an account is written off using the allowance method, accounts receivable
a. is unchanged and the allowance account increases.
b. increases and the allowance account increases.
c. decreases and the allowance account decreases.
d. decreases and the allowance account increases.
82. Two bases for estimating uncollectible accounts are:
a. percentage of assets and percentage of sales.
b. percentage of receivables and percentage of total revenue.
c. percentage of current assets and percentage of sales.
d. percentage of receivables and percentage of sales.
83. The percentage of receivables basis for estimating uncollectible accounts emphasizes
a. cash realizable value.
b. the relationship between accounts receivable and bad debts expense.
c. income statement relationships.
d. the relationship between sales and accounts receivable.
84. Long Company uses the percentage of sales method for recording bad debts expense.
For the year, cash sales are $500,000 and credit sales are $2,000,000. Management
estimates that 1% is the sales percentage to use. What adjusting entry will Long Company
make to record the bad debts expense?
Accounting for Receivables
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a. Bad Debts Expense ....................................................... 25,000
Allowance for Doubtful Accounts .......................... 25,000
b. Bad Debts Expense ....................................................... 20,000
Allowance for Doubtful Accounts .......................... 20,000
c. Bad Debts Expense ....................................................... 20,000
Accounts Receivable ............................................ 20,000
d. Bad Debts Expense ....................................................... 25,000
Accounts Receivable ............................................ 25,000
85. The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to
record estimated uncollectible accounts
a. is relevant when using the percentage of receivables basis.
b. is relevant when using the percentage of sales basis.
c. is relevant to both bases of adjusting for uncollectible accounts.
d. will never show a debit balance at this stage in the accounting cycle.
86. The direct write-off method of accounting for bad debts
a. uses an allowance account.
b. uses a contra-asset account.
c. does not require estimates of bad debt losses.
d. is the preferred method under generally accepted accounting principles.
87. Under the direct write-off method of accounting for uncollectible accounts
a. the allowance account is increased for the actual amount of bad debt at the time of
write-off.
b. a specific account receivable is decreased for the actual amount of bad debt at the
time of write-off.
c. balance sheet relationships are emphasized.
d. bad debts expense is always recorded in the period in which the revenue was recorded.
88. An aging of a company's accounts receivable indicates that $4,000 are estimated to be
uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the
adjustment to record bad debts for the period will require a
a. debit to Bad Debts Expense for $4,000.
b. debit to Allowance for Doubtful Accounts for $2,800.
c. debit to Bad Debts Expense for $2,800.
d. credit to Allowance for Doubtful Accounts for $4,000.
89. An aging of a company's accounts receivable indicates that $3,000 are estimated to be
uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the
adjustment to record bad debts for the period will require a
a. debit to Bad Debts Expense for $3,000.
b. debit to Bad Debts Expense for $4,200.
c. debit to Bad Debts Expense for $1,800.
d. credit to Allowance for Doubtful Accounts for $4,000.
90. Using the percentage of receivables method for recording bad debts expense, estimated
uncollectible accounts are $25,000. If the balance of the Allowance for Doubtful Accounts
is $8,000 debit before adjustment, what is the amount of bad debts expense for that
period?
9 - 14 Test Bank for Accounting Principles, Eighth Edition
a. $25,000
b. $8,000
c. $33,000
d. $17,000
91. Using the percentage of receivables method for recording bad debts expense, estimated
uncollectible accounts are $10,000. If the balance of the Allowance for Doubtful Accounts
is $2,000 credit before adjustment, what is the amount of bad debts expense for that
period?
a. $10,000
b. $8,000
c. $12,000
d. $2,000
92. Using the percentage of receivables method for recording bad debts expense, estimated
uncollectible accounts are $10,000. If the balance of the Allowance for Doubtful Accounts
is $2,000 debit before adjustment, what is the balance after adjustment?
a. $10,000
b. $12,000
c. $8,000
d. $2,000
93. Using the allowance method, the uncollectible accounts for the year is estimated to be
$28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 credit before
adjustment, what is the amount of bad debts expense for the period?
a. $7,000
b. $21,000
c. $28,000
d. $35,000
94. Using the allowance method, the uncollectible accounts for the year is estimated to be
$28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 debit before
adjustment, what is the amount of bad debts expense for the period?
a. $7,000
b. $21,000
c. $28,000
d. $35,000
95. In reviewing the accounts receivable, the cash realizable value is $16,000 before the
write-off of a $1,500 account. What is the cash realizable value after the write-off?
a. $16,000
b. $1,500
c. $17,500
d. $14,500
96. In 2008, the Fitzu Co. had net credit sales of $750,000. On January 1, 2008, Allowance
for Doubtful Accounts had a credit balance of $16,000. During 2008, $30,000 of
uncollectible accounts receivable were written off. Past experience indicates that the
allowance should be 10% of the balance in receivables (percentage of receivable basis).
If the accounts receivable balance at December 31 was $200,000, what is the required
adjustment to the Allowance for Doubtful Accounts at December 31, 2008?
Accounting for Receivables
9 - 15
a. $20,000
b. $34,000
c. $36,000
d. $30,000
97. A company has net credit sales of $900,000 for the year and it estimates that uncollectible
accounts will be 2% of sales. If Allowance for Doubtful Accounts has a credit balance of
$1,000 prior to adjustment, its balance after adjustment will be a credit of
a. $18,000.
b. $19,000.
c. $17,980.
d. $17,000.
98. In 2008, Carpenter Company had net credit sales of 1,125,000. On January 1, 2008,
Allowance for Doubtful Accounts had a credit balance of $27,000. During 2008, $45,000
of uncollectible accounts receivable were written off. Past experience indicates that the
allowance should be 10% of the balance in receivables (percentage of receivables basis).
If the accounts receivable balance at December 31 was $300,000, what is the required
adjustment to the Allowance for Doubtful Accounts at December 31, 2008?
a. $30,000
b. $112,500
c. $48,000
d. $45,000
Use the following information for questions 99-100.
12/31/07
Accounts receivable $525,000
Allowance (45,000)
Cash realizable value $480,000
During 2008, sales on account were $145,000 and collections on account were $86,000. Also
during 2008, the company wrote off $8,000 in uncollectible accounts. An analysis of outstanding
receivable accounts at year end indicated that bad debts should be estimated at $54,000.
99. The change in the cash realizable value from the balance at 12/31/07 to 12/31/08 was a
a. $50,000 increase.
b. $59,000 increase.
c. $42,000 increase.
d. $51,000 increase.
100. Bad debts expense for 2008 is
a. $17,000.
b. $9,000.
c. $54,000
d. $1,000.