Question : 52.Hailey Medical Supply Co., which had no beginning balance in : 1254491

52.Hailey Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $80,000 of revenue on account during 2013. During 2013, Hailey collected $64,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 1% of revenue on account. The amount of net realizable value of receivables on the December 31, 2013 balance sheet would be:   

A. $15,360.

B. $15,200.

C. $16,000.

D. $15,000.

53.Which one of the following is not an accurate description of the Allowance for Doubtful Accounts?   

A. The account is an income statement account.

B. The account is a contra account.

C. The amount of the Allowance for Doubtful Accounts decreases the net realizable value of a company’s receivables.

D. The account is increased by an estimate of uncollectible accounts expense.

54.The percent of receivables method to estimate uncollectible accounts expense is also known as:   

A. the income statement approach.

B. the direct write-off approach.

C. the balance sheet approach.

D. the credit sales approach.

55.The primary reason for a business to allow customers to purchase goods or services on account is to:   

A. decrease the marketability of the company’s inventory.

B. increase cash flow from financing.

C. decrease cost of goods sold.

D. increase sales.

56.The net effect of the entries to recognize the receipt of a previously written-off account under the allowance method is to:   

A. have no effect on total assets or total equity.

B. increase total equity only.

C. decrease total assets.

D. increase total assets and total equity.

On December 31, 2012, the Lindley Corporation estimated that 3% of its credit sales of $225,000 would be uncollectible. Lindley uses the allowance method of accounting for uncollectible accounts. In February 2013, one of Lindley’s customers failed to pay his $2,100 account and was written off. On April 4, 2013, this customer paid Lindley the $2,100.

57.Which of the following answers correctly shows the effect of the December 31, 2012 adjusting entry for uncollectible accounts on the financial statements of the Lindley Corporation?     

A. Option A

B. Option B

C. Option C

D. Option D

58.Which of the following answers correctly states the effect of the February 2013 entry to write off the customer’s account?     

A. Option A

B. Option B

C. Option C

D. Option D

59.Which of the following answers correctly states the effect of recording the reestablishment of the receivable on April 4, 2013?     

A. Option A

B. Option B

C. Option C

D. Option D

60.Which of the following answers correctly states the effect of recording the collection of the reestablished receivable on April 4, 2014?     

A. Option A

B. Option B

C. Option C

D. Option D

61.Assume that the Lindley Corporation uses the direct write-off method of accounting for uncollectible accounts. Which of the following answers correctly describes the effect of the write-off of the customer’s account on Lindley’s financial statements?     

A. Option A

B. Option B

C. Option C

D. Option D