38) Determine the amount of the adjustment for bad debts given:
Bad debts are estimated to be 11% of credit sales
Accounts receivable balance $810,000
Allowance for bad debts balance (debit) $1,900
Net Credit Sales $470,000
$ ________
39) Determine the amount of the adjustment for bad debts given:
Bad debts are estimated to be 3% of credit sales
Accounts receivable balance $600,000
Allowance for bad debts balance (credit) $200
Net Credit Sales $215,000
$ ________
40) Determine the amount of the adjustment for bad debts given:
Bad debts are estimated to be 6% of receivables
Accounts receivable balance $85,000
Allowance for bad debts, balance (debit) $240
Net Sales $750,000
$ ________
41) Determine the amount of the adjustment for bad debts given:
Bad debts are estimated to be 8% of receivables
Accounts receivable balance $97,000
Allowance for bad debts, balance (credit) $550
Net Credit Sales $660,000
$ ________
42) Determine the amount of the adjustment for bad debts given:
Bad debts are estimated to be 7% of receivables
Accounts receivable balance $112,000
Allowance for bad debts, balance (debit) $0
Net Sales $593,000
$ ________
43) 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 income statement approach if 2.5% of net
credit sales is deemed uncollectible.
44) 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 income statement approach if 1.4% of net
credit sales is deemed uncollectible.
45) 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.
46) 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.
47) Prepare the adjusting journal entry for Bad Debts Expense from the following information using the
balance sheet approach. The Allowance for Doubtful Accounts has a debit balance of $4,000.
48) Prepare the adjusting journal entry for Bad Debts Expense from the following information using the
balance sheet approach. The Allowance for Doubtful Accounts has a credit balance of $3,000.
49) The Allowance for Doubtful Accounts has a credit balance of $5,000. Net credit sales for the year were
$900,000. Four percent is the estimated uncollectible based on net credit sales. Calculate the amount of the
adjustment, for the allowance for doubtful accounts, using the income statement approach.
Amount of the adjustment ________
50) The general ledger controlling account for Accounts Receivable shows a debit balance of $222,000. The
Allowance for Doubtful Accounts has a credit balance of $7,320. An aging report of accounts receivable
accounts resulted in an estimate of $42,000 of uncollectible accounts receivable. Calculate the amount of
the adjustment, for the allowance for doubtful accounts, using the balance sheet approach.
Amount of the adjustment ________
51) Evaluate the differences of the effect on the financial statements between the income statement
approach and the balance sheet approach for estimating bad debts expense on the financial statement
presentation.
13.3 Learning Objective 13-3
1) When writing off a specific customer account using the allowance method:
A) Allowance for Doubtful Accounts decreases and Bad Debts Expense increases.
B) Bad Debts Expense increases and Accounts Receivable decreases.
C) Accounts Receivable increases and Allowance for Doubtful Accounts increases.
D) Allowance for Doubtful Accounts decreases and Accounts Receivable decreases.
2) The journal entry to write off an uncollectible account under the allowance method would include a
credit to:
A) Sales.
B) Accounts Receivable.
C) Allowance for Doubtful Accounts.
D) Bad Debts Expense.
3) Town and Country Saddle learns the account receivable for a customer is uncollectible. The journal
entry under the allowance method to write off an account is to:
A) debit Allowance for Doubtful Accounts; credit Bad Debts Expense.
B) debit Sales; credit Allowance for Doubtful Accounts.
C) debit Bad Debts Expense; credit Accounts Receivable.
D) debit Allowance for Doubtful Accounts; credit Accounts Receivable.
4) In what situation would the following journal entry would appear on Arial Company’s records? Travis
uses the allowance method.
Allowance for Doubtful Accounts 320
Accounts Receivable—Ellen Gibbons 320
A) It is a reversing entry.
B) The firm is writing off a specific account.
C) The firm is making a collection of a previously written-off account.
D) The firm is estimating its uncollectible accounts.
5) An entry reinstating an account that was previously written off under the allowance method would
show a(n):
A) decrease to Bad Debts Expense and a decrease to Accounts Receivable.
B) increase to Accounts Receivable and a decrease to Allowance for Doubtful Accounts.
C) increase to Accounts Receivable and an increase to Allowance for Doubtful Accounts.
D) decrease to Bad Debts Expense and an increase to Allowance for Doubtful Accounts.
6) The net realizable value of a company‘s Accounts Receivables is:
A) increased at the time of a specific write-off.
B) decreased at the time of a specific write-off.
C) unchanged at the time of a specific write-off.
D) the guaranteed amount the company will collect from its customers.
7) A customer pays on a specific account that the company had previously written off as uncollectible.
The journal entry to record the reinstatement under the allowance method includes a(n):
A) decrease to Cash.
B) decrease to Sales.
C) increase to Allowance for Doubtful Accounts.
D) decrease to Bad Debts Expense.
8) When a specific customer account is written off under the allowance method, Bad Debts Expense is:
A) debited.
B) not affected.
C) credited.
D) None of these answers is correct.
9) Ohio Company uses the Allowance for Doubtful Accounts Method. When Ohio writes off an
uncollectible account, there is:
A) an increase in Accounts Receivable.
B) a decrease in Accounts Receivable.
C) an increase in the Allowance Account.
D) None of these answers is correct.
10) The direct write-off method prescribes that a previously written off account will reopen when the
customer:
A) sends the full amount to pay off the account.
B) sends any amount to pay on their account.
C) pays the collection bureau.
D) None of the above
11) The two methods of accounting for uncollectible receivables are the direct write-off method and the:
A) equity method.
B) cash method.
C) interest method.
D) allowance method.
12) Ray Lumber Company collects $500 on an account that had been directly written off earlier the same
year in the amount of $1,000. The journal entry to record the reinstatement transaction would include a:
A) $1,000 debit to Accounts Receivable.
B) $500 debit to Accounts Receivable.
C) $500 debit to Bad Debts Recovered.
D) $1,000 debit to Bad Debts Expense.
13) In the direct write-off method, writing off an account causes:
A) a decrease in expense and an increase in an asset.
B) an increase in expense and a decrease in an asset.
C) a decrease in the Allowance account and a decrease in expense.
D) an increase in Accounts Receivable and a decrease to revenue.
14) Pittsburgh Tours collected $190 on an account that had been directly written off the previous year.
The journal entry to record the transaction would include:
A) a debit to Allowance for Doubtful Accounts.
B) a credit to Bad Debts Recovered.
C) a debit to Bad Debts Recovered.
D) a credit to Bad Debts Expense.
15) A company is not able to reasonably estimate its bad debts expense. The method it may use is:
A) net realizable value method.
B) direct write-off method.
C) aging method.
D) income statement method.
16) Molten Manufacturing collects $350 on an account that had been directly written off in the previous
year in the amount of $630. The journal entry to record the transaction would include a:
A) $350 credit to Bad Debts Expense.
B) $350 credit to Bad Debts Recovered.
C) $630 debit to Accounts Receivable.
D) $630 credit to Accounts Receivable.
17) What would be the basis for the following entry on a firm’s records?
Bad Debt Expense 300
Allowance for Doubtful Accounts 300
A) The firm is using the direct write-off method.
B) The firm is writing off an uncollectible account.
C) The firm is using the allowance method for estimating bad debt.
D) None of these answers is correct.
18) Sonny’s Service Bureau is able to collect an amount previously written off last year under the direct
write-off method. The journal entry will:
A) decrease Bad Debts Expense.
B) increase Bad Debts Recovered.
C) decrease Accounts Receivable.
D) decrease Cash.
19) If the direct write-off method is used, the debit account to write off an uncollectible is:
A) Accounts Receivable.
B) Bad Debt Expense.
C) Allowance for Doubtful Accounts.
D) Sales.
20) Open Range Foods writes off a bad debt of $400 on a specific customer account. The journal entry for
this transaction under the allowance method would include:
A) a debit to Bad Debts Expense.
B) a credit to Bad Debts Expense.
C) a credit to Allowance for Doubtful Accounts.
D) a debit to Allowance for Doubtful Accounts.
21) Open Range Foods writes off a bad debt of $400 on a specific customer account. The journal entry for
this transaction under the direct write off method would include:
A) a credit to Allowance for Doubtful Accounts.
B) a credit to Bad Debts Expense.
C) a debit to Bad Debts Expense.
D) a debit to Allowance for Doubtful Accounts.
22) To record receipt of money after an account has been written off in the previous year, using the direct
method you would need to:
A) credit Sales.
B) debit the allowance account.
C) credit Bad Debts Recovered.
D) debit cash.
23) When an account receivable is written off as uncollectible using the direct write off method, it
increases Bad Debts Expense.
24) Bad Debts Recovered is a revenue account usually reported in Other Income on the Income Statement.
25) If there were an uncollectible write off reversal in the same year as the write off, Bad Debts Recovered
would be used rather than Bad Debts Expense.
26) When a specific account receivable is written off as uncollectible under the direct write off method, it
decreases the Allowance for Doubtful Accounts.
27) Under the allowance method, the entry to record a specific uncollectible account write off is a debit to
Allowance for Doubtful Accounts and a credit to Accounts Receivable for the specific customer.
Use the account code numbers to identify how the following transactions would be journalized.
[1] Accounts Receivable
[2] Allowance for Doubtful Accounts
[3] Cash
[4] Bad Debts Recovered
[5] Bad Debts Expense
28) Decrease the allowance for the estimated bad debts using the percentage of receivables.
Debit account ________ Credit account ________
29) Wrote off an account using the direct write off method.
Debit account ________ Credit account ________
30) Record bad debt expense using an allowance method.
Debit account ________ Credit account ________
31) Wrote off an account using an allowance method.
Debit account ________ Credit account ________
For each of the following, identify in column 1 the category to which the account belongs, in column 2 the
normal balance for the account, in column 3 the financial statement that the account in which the account
balance is reported, and in column 4 the account’s nature.
32)
Column 1 Column 2 Column 3 Column 4
Allowance for doubtful accounts
33)
Column 1 Column 2 Column 3 Column 4
Bad debts expense
34)
Column 1 Column 2 Column 3 Column 4
Bad debts recovered
35) Army Supply uses the allowance method of accounting for uncollectible accounts. Record journal
entries for the transactions listed below:
April 2 Received $1,400 from Billie in payment of her $2,000 account.
April 12 Wrote off the balance of Billie’s account.
April 17 Received $250 from Jason to pay off his account in full.
36) Prepare general journal entries to record the following transactions for Elliott Consulting. (The
company uses the income statement approach for recording bad debts expense.)
2018
Dec. 31 Recorded Bad Debts Expense, $ 2,010
2019
Jan. 9 Wrote off Summer’s account as uncollectible, $435
Mar. 12 Wrote off Manny‘s account as uncollectible, $650
Jul. 8 Recovered $100 from Manny
Aug. 19 Wrote off Jared’s account as uncollectible, $215
37) Prepare general journal entries to record the following transactions for the Smith Company. (The
company uses the balance sheet approach for recording bad debts expense.)
2018
Dec. 31 Recorded Bad Debts Expense, $900
2019
Jan. 3 Wrote off Jal’s account as uncollectible, $260
Mar. 4 Wrote off Hall’s account as uncollectible, $95
Jul. 5 Recovered $55 from Hall
Aug. 19 Wrote off M. Wilson’s account as uncollectible, $50
Nov. 7 Recovered $45 from Jal
38) 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.
39) American Contractors uses the direct write-off method for uncollectible accounts. Record the
following transactions in general journal form.
Feb 11 Sold merchandise on account to Leslie Noonan for $8,400. The cost to American for the
merchandise is $4,500.
Mar 8 Received $2,650 cash payment from Leslie Noonan on her account.
Apr 10 Wrote off the balance due on Leslie’s account as uncollectible.
May 3 Unexpectedly received $3,900 cash payment from Leslie Noonan on her account.
Payment was received in the same period as the write off.
40) Describe and contrast the procedures for estimating uncollectible accounts under the (a) income
statement approach, (b) the balance sheet approach, and (c) the direct write-off approach.