110) A company accounts for possible bad debts using the allowance method. When an actual bad
debt occurs, what effect does it have on the accounting equation?
A) Increases assets and increases stockholders’ equity.
B) Decreases assets and decreases stockholders’ equity.
C) Decreases assets and decreases liabilities.
D) No effect on the accounting equation.
111) Which of the following is recorded by a credit to Accounts Receivable?
A) Sale of inventory on account.
B) Estimating the annual allowance for uncollectible accounts.
C) Estimating annual sales returns.
D) Writing off of bad debts.
112) Lail Inc. accounts for bad debts using the allowance method. On June 1, Lail Inc. wrote off
Andrew Green’s $2,500 account. Based on Lail’s estimation, Andrew Green will never pay any
portion of the balance in his account. What effect will this write-off have on Lail Inc.’s balance
sheet at the time of the write-off?
A) An increase to stockholders’ equity and a decrease to liabilities.
B) No effect.
C) An increase to assets and an increase to stockholders’ equity.
D) A decrease to assets and a decrease to stockholders’ equity.
113) At the beginning of 2021, the balance in Jackson Enterprises’ Allowance for Uncollectible
Accounts was $31,800. During 2021, the company wrote off $38,000 of accounts receivable.
Writing off the individual bad debts would include a:
A) Debit to Bad Debt Expense.
B) Credit to Accounts Receivable.
C) Credit to the Allowance for Uncollectible Accounts.
D) Debit to Bad Debt Expense; credit to the Allowance for Uncollectible Accounts.
114) The current year’s beginning and ending balances for Allowance for Uncollectible Accounts
is $23,000 and $27,000, respectively. If the amount of Bad Debt Expense for the year is $18,000,
what is the amount written off for the year?
A) $14,000.
B) $10,000.
C) $18,000.
D) $22,000.
115) Collections of accounts receivable that previously have been written off are credited to:
A) A Gain account.
B) Accounts Receivable.
C) Bad Debt Expense.
D) Retained Earnings.
116) A company collects an account receivable previously written off. Indicate how this
transaction would affect (1) assets, (2) stockholders’ equity, and (3) revenues.
A) (1) Increase, (2) Increase, (3) Decrease
B) (1) Increase, (2) Increase, (3) Increase
C) (1) Increase, (2) Decrease, (3) Increase
D) (1) No effect, (2) No effect, (3) No effect
117) At December 31, Gill Co. reported accounts receivable of $238,000 and an allowance for
uncollectible accounts of $600 (credit) before any adjustments. An analysis of accounts receivable
suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. The
amount of the adjustment for uncollectible accounts would be:
A) $6,540.
B) $7,800.
C) $7,140.
D) $7,740.
118) At December 31, Gill Co. reported accounts receivable of $238,000 and an allowance for
uncollectible accounts of $600 (debit) before any adjustments. An analysis of accounts receivable
suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. The
amount of the adjustment for uncollectible accounts would be:
A) $6,540.
B) $7,800.
C) $7,140.
D) $7,740.
119) At December 31, Amy Jo’s Appliances had account balances in Accounts Receivable of
$311,000 and in Allowance for Uncollectible Accounts of $970 (credit) before any adjustments.
An analysis of Amy Jo’s December 31 accounts receivable suggests that the allowance for
uncollectible accounts should be 2% of accounts receivable. Bad debt expense for the year should
be:
A) $6,220.
B) $6,450.
C) $5,250.
D) $7,190.
120) At December 31, Amy Jo’s Appliances had account balances in Accounts Receivable of
$311,000 and in Allowance for Uncollectible Accounts of $970 (debit) before any adjustments. An
analysis of Amy Jo’s December 31 accounts receivable suggests that the allowance for
uncollectible accounts should be 2% of accounts receivable. Bad debt expense for the year should
be:
A) $6,220.
B) $6,450.
C) $5,250.
D) $7,190.
121) At the end of 2021, Murray State Lenders had a balance in its Allowance for Uncollectible
Accounts of $4,500 (credit) before any adjustment. The company estimated its future uncollectible
accounts to be $12,000 using the percentage-of-receivables method. Murray State’s adjustment on
December 31, 2021, to record its estimated uncollectible accounts included a:
A) Credit to Allowance for Uncollectible Accounts of $12,000.
B) Credit to Bad Debt Expense of $7,500.
C) Debit to Allowance for Uncollectible Accounts of $7,500.
D) Debit to Bad Debt Expense of $7,500; credit to Allowance for Uncollectible Accounts of
$7,500.
122) At the end of 2021, Murray State Lenders had a balance in its Allowance for Uncollectible
Accounts of $4,500 (debit) before any adjustment. The company estimated its future uncollectible
accounts to be $12,000 using the percentage-of-receivables method. Murray State’s adjustment on
December 31, 2021, to record its estimated uncollectible accounts included a:
A) Credit to Allowance for Uncollectible Accounts of $12,000.
B) Credit to Bad Debt Expense of $16,500.
C) Debit to Allowance for Uncollectible Accounts of $16,500.
D) Debit to Bad Debt Expense of $16,500; credit to Allowance for Uncollectible Accounts of
$16,500.
123) At December 31, Tremble Music had account balances in Accounts Receivable of $300,000
and in Allowance for Uncollectible Accounts of $1,000 (debit) before any adjustments. An
analysis of Tremble’s December 31 accounts receivable suggests that 5% of the account balances
are not expected to be collected. The balance of Allowance for Uncollectible Accounts after
adjustment will be:
A) $1,000.
B) $16,000.
C) $14,000.
D) $15,000.
124) At December 31, Tremble Music had account balances in Accounts Receivable of $300,000
and in Allowance for Uncollectible Accounts of $1,000 (credit) before any adjustments. An
analysis of Tremble’s December 31 accounts receivable suggests that 5% of the account balances
are not expected to be collected. The balance of Allowance for Uncollectible Accounts after
adjustment will be:
A) $1,000.
B) $15,000.
C) $16,000.
D) $14,000.
125) At the end of the year, Mark Inc. estimates future bad debts to be $6,500. The Allowance for
Uncollectible Accounts has a credit balance of $2,500 before any year-end adjustment. What
adjustment should Mark Inc. record for the estimated bad debts at the end of the year?
A) Debit Bad Debt Expense, $6,500; credit Allowance for Uncollectible Accounts, $6,500.
B) Debit Bad Debt Expense, $4,000; credit Allowance for Uncollectible Accounts $4,000.
C) Debit Allowance for Uncollectible Accounts, $9,000; credit Bad Debt Expense, $9,000.
D) Debit Bad Debt Expense, $9,000; credit Allowance for Uncollectible Accounts, $9,000.
126) Suppose that the balance of a company’s Allowance for Uncollectible Accounts was $6,200
(credit) at the end of the year, prior to any adjustments. The company estimated that the total of
uncollectible accounts in its accounts receivable was $44,300 at the end of the year. What amount
of bad debt expense would appear in the company’s year-end income statement?
A) $38,100.
B) $105,700.
C) $33,000.
D) $50,500.
127) Prior to year-end adjusting entries, what would explain the Allowance for Uncollectible
Accounts having a debit balance?
A) The amount of cash collections from customers in the current year was less the amount of cash
collections from customers in the prior year.
B) The amount of actual uncollectible accounts in the current year was less than the estimate of
uncollectible accounts made at the end of the prior year.
C) The amount of credit sales in the current year was greater than the amount of credit sales made
in the prior year.
D) The amount of actual uncollectible accounts in the current year was greater than the estimate of
uncollectible accounts made at the end of the prior year.
128) Suppose at the end of the year before any adjusting entries, a company has a balance in
Allowance for Uncollectible Accounts of $5,000 (debit). During the year, the company reported
the following amounts:
Credit sales to customers = $550,000
Cash collections from customers = $540,000
Actual bad debts = $20,000
What was the balance of Allowance for Uncollectible Accounts at the beginning of the year?
A) $10,000.
B) $20,000.
C) $15,000.
D) $25,000.
129) If the estimate of uncollectible accounts at the end of the current year is too high, which of the
following is true in the following year?
A) Cash collections from customers will be greater than expected.
B) The balance of Allowance for Uncollectible Accounts will be a credit prior to its year-end
adjustment.
C) The amount reported for Bad Debt Expense will be less than the ending balance of Allowance
for Uncollectible Accounts after its year-end adjustment.
D) All of the other answers are true in the following year.
130) On December 31, 2021, Coolwear Inc. had balances in Accounts Receivable and Allowance
for Uncollectible Accounts of $48,400 and $940, respectively. During 2022, Coolwear wrote off
$820 in accounts receivable and determined that there should be an allowance for uncollectible
accounts of $1,140 at December 31, 2022. Bad debt expense for 2022 would be:
A) $320.
B) $1,140.
C) $820.
D) $1,020.
131) On December 31, 2021, Larry’s Used Cars had balances in Accounts Receivable and
Allowance for Uncollectible Accounts of $53,600 and $1,325, respectively. During 2022, Larry’s
wrote off $1,465 in accounts receivable and determined that there should be an allowance for
uncollectible accounts of $1,280 at December 31, 2022. Bad debt expense for 2022 would be:
A) $1,280.
B) $1,465.
C) $1,420.
D) $1,140.
132) For accounts receivable, the longer an account is outstanding, the:
A) Better the customer.
B) More likely it will prove uncollectible.
C) More likely the customer will return.
D) Higher probability of it being collected.
133) The method of estimating uncollectible accounts based on the length of time the amount is
owed by the customer is referred to as the:
A) Activity method.
B) Realization method.
C) Direct write-off method.
D) Aging method.
134) When using an aging method for estimating uncollectible accounts:
A) Older accounts are considered less likely to be collected.
B) The number of days the account is past due is not considered.
C) Older accounts are considered more likely to be collected.
D) No estimate of uncollectible accounts is made.
135) Compared to other methods of estimating uncollectible accounts, the aging of accounts
receivables method tends to:
A) Be more accurate.
B) Result in the highest net income.
C) Result in the lowest net income.
D) Recognize bad debts earlier.
136) On December 31, 2021, Andy Inc. has a debit balance of $1,500 for the Allowance for
Uncollectible Accounts before any year-end adjustment. Andy Inc. also has the following
information for its accounts receivable and the estimated percentages of bad debts for different
past-due amounts:
Age Group
(days past due)
Accounts
Receivable
Estimated Percent
Uncollectible
0-30
$
50,000
5
31-60
$
20,000
10
61-90
$
10,000
20
What is the amount of bad debt expense to be reported on Andy Inc.’s financial statements for 2021
using the aging method?
A) $6,500.
B) $1,500.
C) $5,000.
D) $8,000.
137) McConnell’s Bakeries had the following balances on December 31, 2021, before any
adjustment: Accounts Receivable = $100,000; Allowance for Uncollectible Accounts = $4,100
(credit). McConnell’s estimates uncollectible accounts based on an aging of accounts receivable as
shown below:
Age Group
(days past due)
Accounts
Receivable
Estimated Percent
Uncollectible
Not yet due
$
50,000
4
0-30
$
20,000
8
31-60
$
18,000
10
More than 60
$
12,000
40
What amount of bad debt expense did McConnell’s record in its December 31, 2021, adjustment to
the allowance account?
A) $10,200.
B) $12,800.
C) $15,300.
D) $6,100.
138) A company creates the following accounts receivable aging report at the end of the year:
Age
Amount
Estimated Uncollec
tible
Less than 30 days
$
6,000
5
%
31-60 days
$
4,000
10
%
61+ days
$
2,000
25
%
Prior to adjusting entries, the Allowance for Uncollectible Accounts has a debit balance of $500.
The year-end adjustment would include a:
A) Credit to Allowance for Uncollectible Accounts for $1,200.
B) Debit to Bad Debt Expense for $700.
C) Debit to Bad Debt Expense for $1,700.
D) Debit to Bad Debt Expense for $1,200.
139) Crimson Inc. recorded credit sales of $750,000, of which $600,000 is not yet due, $100,000 is
past due for up to 180 days, and $50,000 is past due for more than 180 days. Under the aging of
receivables method, Crimson Inc. expects it will not collect 1% of the amount not yet due, 10% of
the amount past due for up to 180 days, and 20% of the amount past due for more than 180 days.
The allowance account had a debit balance of $1,000 before adjustment. After adjusting for bad
debt expense, what is the ending balance of the allowance account?
A) $29,000.
B) $28,000.
C) $27,000.
D) $26,000.
140) During the year, Bears Inc. recorded credit sales of $500,000. Before adjustments at year-end,
Bears has accounts receivable of $300,000, of which $50,000 is past due, and the allowance
account had a credit balance of $2,500. Using the aging of receivables method, what would be the
adjustment assuming Bears expects it will not collect 5% of the amount not yet past due and 20%
of the amount past due?
A.
Bad Debt Expense
22,500
Allowance for Uncollectible Accounts
22,500
B.
Bad Debt Expense
25,000
Allowance for Uncollectible Accounts
25,000
C.
Bad Debt Expense
20,000
Allowance for Uncollectible Accounts
20,000
D.
Allowance for Uncollectible Accounts
20,000
Bad Debt Expense
20,000
A) Option A
B) Option B
C) Option C
D) Option D
141) The following information pertains to Lightning Inc., at the end of December:
Credit Sales
$
60,000
Accounts Payable
10,000
Accounts Receivable
7,000
Allowance for Uncollectible Accounts
400
credit
Cash Sales
20,000
Lightning uses the aging method and estimates it will not collect 2% of accounts receivable not yet
due, 10% of receivables up to 30 days past due, and 40% of receivables greater than 30 days past
due. The accounts receivable balance of $7,000 consists of $3,500 not yet due, $2,000 up to 30
days past due, and $1,500 greater than 30 days past due. What is the appropriate amount of Bad
Debt Expense?
A) $400.
B) $470.
C) $870.
D) $1,270.
142) The direct write-off method is used when:
A) Uncollectible accounts are not anticipated or are immaterial.
B) A company elects to use this method as one of several alternatives.
C) A company has greater cash outflows than cash inflows.
D) A company expects excessive sales returns.
143) Which method is not allowed under Generally Accepted Accounting Principles for the
purpose of accounting for uncollectible accounts?
A) Allowance method.
B) Direct write-off method.
C) Aging method.
D) Percentage-of-receivables method.
144) The direct write-off method is not normally an acceptable method for GAAP because it fails
to report:
A) Revenue from the sale of goods or services to customers.
B) Cash collected from customers.
C) Accounts receivable for the net amount of cash expected to be collected.
D) The amounts receivable from customers.
145) The direct write-off method is generally not permitted for financial reporting purposes
because:
A) Compared to the allowance method, it would allow greater flexibility to managers in
manipulating reported net income.
B) This method is primarily used for tax purposes.
C) It is too difficult to accurately estimate future bad debts.
D) Accounts receivable are not reported for the net amount of cash expected to be collected.
146) Which accounting concept does the direct write-off method violate?
A) Total assets equal total liabilities plus total stockholders’ equity.
B) Recording amount owed within one year as current liabilities.
C) Recognizing revenue when goods or services are provided to customers.
D) Timeliness in recognizing uncollectible accounts.
147) If the direct write-off method is used to account for uncollectible accounts, which of the
following statements is false?
A) An allowance account is not used.
B) No adjustment is made at the end of the year to estimate future uncollectible accounts.
C) Accounts receivable will be reported at the net amount of cash expected to be collected.
D) Bad debt expense is recorded at the time an actual bad debt is written-off.
148) Under the direct write-off method, what adjustment is made at the end of the year to account
for possible future bad debts?
A) Debit Bad Debt Expense.
B) Debit Allowance for Uncollectible Accounts.
C) Credit Accounts Receivable.
D) No adjustment is made.
149) Under the direct write-off method, what adjustment is made at the time an actual bad debt
occurs?
A) Debit Bad Debt Expense, credit Allowance for Uncollectible Accounts.
B) Debit Allowance for Uncollectible Accounts, credit Accounts Receivable.
C) Debit Bad Debt Expense, credit Accounts Receivable.
D) No adjustment is made.
150) The distinction between the direct write-off method and the allowance method is:
A) The year in which cash is collected from customers.
B) The cumulative amount of bad debt expense reported across years.
C) The customers to which goods or services are provided.
D) The amount of bad debt expense reported in each year.
151) The direct write-off method is an acceptable method for what purpose?
A) Issuing financial statements to stockholders.
B) Tax reporting.
C) Compliance with Generally Accepted Accounting Principles.
D) Financial reporting.
152) The primary difference between a note receivable and an account receivable is:
A) A note receivable cannot be classified as a current asset.
B) Borrowers have the option of not paying a note receivable.
C) An account receivable is more likely to be collected.
D) A note receivable is evidenced by a written debt instrument.
153) A(n) ________ receivable is an informal credit arrangement with trade customers, whereas
a(n) ________ receivable is a formal signed credit arrangement between a creditor and a debtor.
A) Account; Note
B) Revenue; Note
C) Note; Account
D) Allowance; Stock