Exam 16: Accounting for Accounts Receivable

Supreme Carpet Care estimates the amount of uncollectible accounts using the percentage of receivables method. After aging the accounts, it is estimated that $7,225 will not be collecteD.​ ​ Required: Give the end-of-period adjusting entry at December 31 in general journal form to enter the estimate for bad debt expense assuming the allowance for bad debts account has a debit balance of $420 before adjustment.

Match the terms with the definitions. -A method in which the current year's uncollectible accounts are estimated based on the relationship between the amount of accounts receivable and the amount of uncollectible accounts in prior years.

Dude Ranch Circle estimates its uncollectible accounts at 1.5% of its credit sales of $825,000. When adjusting for estimated losses from uncollectible accounts, the debit to Bad Debt Expense is

Some businesses and individuals who "charge it" are unwilling or unable to "pay for it."

If after taking a percentage of sales on account, it is estimated that $1,000 will not be collected and the allowance account has an existing credit balance of $200, the adjusting entry would be for the amount of $1,200.

There are three methods of accounting for uncollectible accounts⎯the direct write-off method, the allowance method, and the reserve method.

Under the percentage of receivables method, the adjusting entry at the end of the period for bad debt expense is not affected by the current balance in the allowance for bad debts account.

If actual write-offs are significantly higher or lower than estimated uncollectible accounts over a number of periods, a large debit or credit balance will accumulate in the allowance for bad debts account.

Most people tend to buy more if they can "charge it" rather than pay cash.

After aging the accounts receivable, it is estimated that $420 will not be collected and the allowance account has an existing debit balance of $100. If accounts receivable is $145,000, the net receivables would be

Which of the following is an advantage of using the direct write-off method?

The credit portion of an adjusting entry to enter the estimate for uncollectible accounts can be made directly to a specific receivable account.

One major cost of selling goods on account could be

The matching concept states that expenses incurred to produce particular revenues should be matched with those revenues.

Match the terms with the definitions. -A method in which the bad debt expense is not recognized until it has been determined that an account is uncollectible.

Under the percentage of sales method, the adjusting entry at the end of the period for bad debt expense is affected by the current balance in the allowance for bad debts account.

After aging the accounts receivable, it is estimated that $790 will not be collected and the allowance account has an existing debit balance of $230. The adjusting entry under the aging approach would be for the amount of

The allowance for bad debts account may have a credit balance prior to adjustment.

Under the direct write-off method, when an account receivable is written off in one accounting period and is collected in the following accounting period, which of the following would be included in the journal entry?

When a large balance accumulates in the allowance for bad debts account, the percentage of sales used to estimate uncollectibles should be modified.