Question :
21.Delvin Co. uses the percentage of credit sales approach in : 1253647
21.Delvin Co. uses the percentage of credit sales approach in estimating its bad debt expense. The total estimate that is calculated by multiplying the percentage times the net sales revenue for the period will be equal to
a. the debit balance required in the allowance for doubtful accounts after the recognition of bad debts expense.
b. the credit balance required in the allowance for doubtful accounts after the recognition of bad debts expense.
the difference between the beginning and the ending accounts receivable balance.
the amount of bad debt expense.
22.Maradonna Co. uses an aging schedule of accounts receivable in estimating its bad debt expense. The total estimate, which appears on the aging schedule, will be equal to
a. the amount of bad debts expense on the company’s income statement.
b. the debit balance required in the allowance account prior to the recognition of bad debts expense.
c. the increase in bad debts expense as a result of the estimate.
d. the credit balance required in the allowance account after the recognition of bad debts expense.
23.On December 1, 2010, Smith Company delivered a shipment of goods to a Danish customer for a price of 160,000 euros. If on that date 1.3 U.S. dollars could be exchanged for 1 euro. If Smith closes its books on December 31 and 1 U.S. dollar is trading for 1 euro at that time, the adjusting entry that Smith would record would include:
a. a credit to Exchange Rate Gain for $48,000.
b. a debit to Accounts Receivable for $20,800.
c. a debit to Exchange Rate Loss for $48,000.
d.a debit to Sales for $48,000.
24.Under the allowance method of accounting for bad debts, the actual write-off of an account receivable determined to be uncollectible
a. decreases current assets.
b. has no effect on current assets.
c. increases current assets.
d.occurs in the same accounting period as the sale.
25.Polo, Inc. uses the direct write-off method of accounting for bad debts. During July, Torey’s account was written off as uncollectible. The write-off of Torey’s account
a. increases both the current and quick ratios.
b. decreases the current ratio and has no effect on the quick ratio.
c. decreases both the current and quick ratios.
d. increases the current ratio and has no effect on the quick ratio.
26.Alma Company uses the allowance method of accounting for bad debts. Alma:
a.is violating the matching principle.
b.will record bad debt expense only when an account is determined to be uncollectible.
c.will not sell to customers on account anymore.
d.will report accounts receivable in the balance sheet at their net realizable value.
27.If a company decreases its cash discount offer from 3/10, n/30 to 2/10, n/60, then it would expect its accounts receivable collection period to
a. increase.
b. decrease.
c. remain the same.
d. There is not enough information to answer this question.
28.A company’s allowance for doubtful accounts is $4,000 and $3,000 on 1/1/11 and 1/1/10, respectively. During 2010, bad debts expenses were estimated to be 6% on net credit sales of $100,000. During 2010, the amount of accounts written off as uncollectible amounts to
a. $6,000.
b. $7,000.
c. $5,000.
d. $4,000.
29.The journal entry to record the recovery of a previously written-off $2,000 account receivable (for customer Leno Company) under the allowance method would include:
a.a credit to Bad Debt Expense.
b.a credit to Cash.
c.a debit to Accounts Payable – Leno Company.
d.a credit to Allowance for Doubtful Accounts.
30.The allowance method of accounting for bad debts emphasizes the net realizable value of accounts receivable on the balance sheet when
a.the direct write-off method is used.
b.the percentage of net credit sales approach is used to estimate uncollectibles.
c.the percentage of accounts receivable approach is used to estimate uncollectibles.
d.a company omits cash payments during the accounting period.
