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Exam 13: Accounting for Bad Debts

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Question 1

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On December 31, 2010, Paint Pros had a balance in Accounts Receivable of $15,000. Net credit sales for the year were $450,000. The Allowance for Doubtful Accounts has a credit balance of $900. Journalize the recording of the bad debt expense under the income statement approach if 2% of net credit sales is deemed uncollectible.

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Question 2

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Gross Accounts Receivable is $10,000. Allowance for Doubtful Accounts has a credit balance of $200. Net sales for the year are $150,000. In the past, 2% of sales had proved uncollectible, and an aging of the receivables indicates $1,200 is doubtful. Under the balance sheet approach, Bad Debts Expense for the year is:

A) $1,000.
B) $3,000.
C) $2,800.
D) $1,200.

E) B) and D)
F) None of the above

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Question 3

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When all of the cash for an account previously written off under the direct write-off method is unexpectedly collected, the correct entry would be:

CJM Sales uses the direct write-off method in accounting for uncollectible accounts. Record the following transactions in general journal form.

Sigma reports net credit sales of $400,000. There is a credit balance of $1,000 in the Allowance for Doubtful Accounts. Uncollectible accounts are estimated to be 2.5% of net credit sales. Under the income statement approach, the adjusting entry would require a debit to Bad Debt Expense for:

The net realizable value of a company's Accounts Receivables is:

The adjustment for bad debts using the percentage of receivables ignored the credit balance in the Allowance account. This error would cause:

Use the account code numbers to identify how the following transactions would be journalized. -Collected a partial payment from a bad debt under the allowance method. The account had been reinstated. Debit account ________ Credit account ________

The two methods of accounting for uncollectible receivables are the allowance method and the:

On December 31, 2010, Paint Pros had a balance in Accounts Receivable of $15,000. Net credit sales for the year were $450,000. The Allowance for Doubtful Accounts has a debit balance of $800. Journalize the recording of the bad debt expense under the income statement approach if 0.8% of net credit sales is deemed uncollectible.

Stacy's Service Bureau is able to collect an amount previously written off last year under the direct method. The journal entry will:

Gross Accounts Receivable is $10,000. Allowance for Doubtful Accounts has a credit balance of $200. Net sales for the year are $150,000. In the past, 2% of sales had proved uncollectible. What would be the adjusted balance of the Allowance account under the income statement approach?

The income statement approach estimates a percentage of sales that is uncollectible.

A debit balance in Allowance for Doubtful Accounts indicates the estimate for Bad Debts was too high.

Myra's balance of Accounts Receivable is $4,000. The balance of the Allowance account is $600 credit. Myra writes off a $150 uncollectible account. The effect on net realizable value of the receivables is that it:

Before the accounts are adjusted and closed at the end of the year, Accounts Receivable has a normal balance of $200,000 and Allowance for Doubtful Accounts has a debit balance $20,000. What is the net realizable value of the accounts receivable?

Use the account code numbers to identify how the following transactions would be journalized. -Reinstated an account previously written off under the allowance method. Debit account ________ Credit account ________

Determine the estimated realizable (collectable)value: Bad debts are estimated to be 1% of receivables $ ________

Harry's Hardware estimates that approximately $1.75 out of every $100 of credit sales proves to be uncollectible. Barber calculates Bad Debts Expense using the:

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?