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Exam 13: Accounting for Bad Debts

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Question 51

Multiple Choice

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Bad Debts Expense is:

A) not included in Cost of Goods Sold.
B) considered an expense matched with revenues.
C) listed on the income statement.
D) All of the above.

E) A) and C)
F) A) and B)

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Question 52

Multiple Choice

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When a customer's account is written off:

A) net realizable value of the Accounts Receivable remains the same.
B) net realizable value of the Accounts Receivable decreases.
C) net realizable value of the Accounts Receivable increases.
D) None of the above

E) A) and B)
F) All of the above

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Question 53

True/False

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Allowance for Doubtful Accounts is a contra-asset account.

Bad Debts Recovered is a revenue account usually reported in Other Income on the Income Statement.

The normal balance of the Bad Debts Expense account is a debit.

What type of account is a Bad Debts Expense?

Canteen Depot estimated uncollectible accounts in the amount of $900 for the period. There is a credit balance in the allowance account of $400. Under the aging of receivables method, the entry to record bad debts expense is:

On December 31, 2019, Balloon Buddies had a balance in Accounts Receivable of $39,000. Net credit sales for the year were $334,000. The Allowance for Doubtful Accounts has a credit balance of $700. Journalize the recording of the bad debts expense under the balance sheet approach if $1,360 is the estimated amount of uncollectible accounts.

A company uses the allowance method and has determined a customer's bill for $6,000 must be written off. The journal entry to record the write off is:

Gross Accounts Receivable is $18,000. Allowance for Doubtful Accounts has a credit balance of $300. Net credit sales for the year are $150,000. In the past, 2% of credit sales had proved uncollectible, and an aging of the receivables indicates $2,100 as uncollectible. What would be the adjusted balance of the Allowance account under the balance sheet approach?

An entry reinstating an account that was previously written off under the allowance method would show a(n) :

Plumbing Unlimited uses the direct write-off method for uncollectible accounts. Record the following transactions in general journal form. Aug 15 Sold merchandise on account to Maureen Townsend for $3,500. The cost to Plumbing Unlimited for the merchandise is $1,000. Sept 15 Received $1,200 cash payment from Maureen Townsend on her account. Sept 30 Received $800 cash payment from Maureen Townsend on her account. Oct 15 Wrote off the balance due on Maureen's account as uncollectible.

A company is not able to reasonably estimate its bad debts expense. The method it may use is:

Before the accounts are adjusted and closed at the end of the year, Accounts Receivable has a normal balance of $600,000 and Allowance for Doubtful Accounts has a debit balance of $40,000. What is the net realizable value of accounts receivable?

Determine the amount of the adjustment for bad debts given: Bad debts are estimated to be 11% of credit sales

The journal entry to write off an uncollectible account under the allowance method would include a credit to:

The Accounts Receivable subsidiary ledger is:

On December 31, 2019, Balloon Buddies had a balance in Accounts Receivable of $39,000. Net credit sales for the year were $334,000. The Allowance for Doubtful Accounts has a debit balance of $700. Journalize the recording of the bad debts expense under the balance sheet approach if $1,360 is the estimated amount of uncollectible accounts.

When a specific account receivable is written off as uncollectible under the direct write off method, it decreases the Allowance for Doubtful Accounts.

Current assets listed on the balance sheet include: