Question : 81. The materiality constraint: A. States that an amount can be ignored if : 1225945

81. The materiality constraint: 

A. States that an amount can be ignored if its effect on financial statements is unimportant to user’s business decisions.

B. Requires use of the allowance method for bad debts.

C. Requires use of the direct write-off method.

D. States that bad debts not be written off.

E. Requires that expenses be reported in the same period as the sales they helped produce.

82. If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in: 

A. An increase in the expenses of the current period.

B. A reduction in current assets.

C. A reduction in equity.

D. No effect on the expenses of the current period.

E. A reduction in current liabilities.

83. On October 29 of the current year, a company concluded that a customer’s $4,400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on this company’s net income and total assets assuming the allowance method is used to account for bad debts? 

A. Decrease in net income; no effect on total assets.

B. No effect on net income; no effect on total assets.

C. Decrease in net income; decrease in total assets.

D. Increase in net income; no effect on total assets.

E. No effect on net income; decrease in total assets.

84. Newton Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Newton Company wrote off the $3,000 uncollectible account of its customer, P. Best. On July 10, Newton received a check for the full amount of $3,000 from Best. On July 10, the entry or entries Newton makes to record the recovery of the bad debt is:   

A. Option A

B. Option B

C. Option C

D. Option D

85. The allowance method based on the idea that a given percent of a company’s credit sales for the period are uncollectible is: 

A. The percent of sales method.

B. The percent of accounts receivable method.

C. The aging of accounts receivable method.

D. Direct write-off method.

E. Factoring method.

86. A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the: 

A. Direct write-off method.

B. Aging of accounts receivable method.

C. Percentage of sales method.

D. Aging of investments method.

E. Percent of accounts receivable method.

87. An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period the sales are recorded, and (2) reports accounts receivable at the estimated amount of cash to be collected is the: 

A. Allowance method of accounting for bad debts.

B. Aging of notes receivable.

C. Adjustment method for uncollectible debts.

D. Direct write-off method of accounting for bad debts.

E. Cash basis method of accounting for bad debts.

88. On December 31 of the current year, a company’s unadjusted trial balance included the following: Accounts Receivable, debit balance of $97,250; Allowance for Doubtful Accounts, credit balance of $951. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year will be uncollectible? 

A. $951.

B. $3,992.

C. $4,884.

D. $5,835.

E. $6,786.

89. A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $175. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?   

A. Option A

B. Option B

C. Option C

D. Option D

90. A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company’s unadjusted trial balance reported the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates 0.6% of credit sales to be uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared? 

A. $1,275

B. $1,775

C. $4,500

D. $4,800

E. $5,500