Exam 16: Accounting for Accounts Receivable

The allowance for bad debts account is sometimes referred to as Allowance for Doubtful Accounts.

Last year, the Tilden Co. had credit sales in the amount of $470,000, and it had uncollectible accounts in the amount of $4,700. Based on last year, what would the percent of estimated uncollectible accounts be this year?

One method for estimating the amount of uncollectibles involves taking a percentage of sales on account.

Accountants argue that which of the following approaches to estimating Allowance for Bad Debts provides a realistic estimate of the net receivables?

In view of past experience, it is expected there will be a loss due to uncollectible accounts of an amount equal to one-half of one percent of the sales on account during the year. If the sales on account amounted to $250,000, the estimated uncollectible account losses would be

The direct write-off method of determining bad debt expense is subjective and can be manipulated by management.

The allowance for bad debts account is contra to which of the following accounts?

If after aging the accounts receivables, it is estimated that $900 will not be collected and the allowance account has an existing debit balance of $200, the adjusting entry would be for the amount of $700.

The following account balances are those of Music Land Supply Company as of December 31, the end of the fiscal year, before adjustments. ​ Required: Prepare the necessary adjusting entry to record Bad Debt Expense in each of the following independent cases. a. Uncollectible accounts are estimated at 1.5% of credit sales. b. An aging of the accounts receivable indicates that $6,850 will not be collected. c. Assume the same facts in (b), except that the balance in Allowance for Bad Debts is a $420 debit before the adjustment. d. Assume the same facts as in (a), except that the balance in Allowance for Bad Debts is a $350 debit before the adjustment.

Computing a percentage of accounts receivable is the simplest and most commonly used approach to estimating uncollectible accounts.

If after aging the accounts receivables, it is estimated that $1,800 will not be collected and the allowance account has an existing credit balance of $300, the adjusting entry would be for the amount of $1,500.

The direct write-off method has one advantage⎯it is very simple to apply.

When an account has been written off under the direct write-off method in one period and is collected in a subsequent period, the credit to reinstate the account is made to

The direct write-off method is

In aging the receivables, each customer's balance is analyzed separately to determine how long it has been outstanding.

Which of the following is a method of accounting for uncollectible accounts?

Allowance for Bad Debts is a contra-liability account.

Match the terms with the definitions. -A concept that requires expenses to be matched with the revenues they helped to produce.

Once an account has been written off using the direct write-off method, it will not be collected.

The balance of the allowance for bad debts account after adjustment, using the percentage of sales method, must be equal to the percent of uncollectible accounts multiplied by the amount of credit sales.