Question 1

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.​
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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.

Accepted Answer

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Question 2

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.

Accepted Answer

A)  aging the receivables
B)  allowance method
C)  bad debt expense
D)  direct write-off method
E)  matching principleF) net receivablesG) percentage of receivables methodH) percentage of sales method G

Question 3

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

Accepted Answer

A)   $82,500.
B)   $123,750.
C)   $12,375.
D)   $8,250. C

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

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.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)   $145,000.
B)   $144,580.
C)   $144,900.
D)   $144,480.

Question 11

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

Accepted Answer

A)   The revenue associated with the sale might be recognized in one period and the expense resulting from the uncollectible account recognized in another.
B)   The amount of Bad Debt Expense recognized in a given period is subject to manipulation by management.
C)   The amount of Accounts Receivable reported on the balance sheet does not represent the amount of cash actually expected to be collected.
D)   It is very simple to apply.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

One major cost of selling goods on account could be

Accepted Answer

A)   cash shortages.
B)   easy credit.
C)   accounts payable.
D)   uncollectible accounts.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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.

Accepted Answer

A)  aging the receivables
B)  allowance method
C)  bad debt expense
D)  direct write-off method
E)  matching principleF) net receivablesG) percentage of receivables methodH) percentage of sales method

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)   $790.
B)   $230.
C)   $560.
D)   $1,020.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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?

Accepted Answer

A)   debit Accounts Receivable
B)   credit Bad Debt Expense
C)   credit Cash
D)   credit Accounts Receivable

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 16: Accounting for Accounts Receivable

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.