124.
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 approach, 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?
125.
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
approach, what would be the adjustment assuming Bears expects it will not to collect 5%
of the amount not yet past due and 20% of the amount past due?
A.
Bad Debt Expense
Allowance for Uncollectible Accounts
22,500
B.
Bad Debt Expense
Allowance for Uncollectible Accounts
25,000
C.
Bad Debt Expense
Allowance for Uncollectible Accounts
20,000
D.
Allowance for Uncollectible Accounts
Bad Debt Expense
20,000
126.
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 less than 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 less than 30 days past due, and $1,500 greater than
30 days past due. What is the appropriate amount of Bad Debt Expense?
127.
When $2,500 of accounts receivable are determined to be uncollectible, which of the
following should the company record to write off the accounts using the allowance
method?
128.
Using the allowance method, writing off an actual bad debt would include a:
129.
Richard LLC accounts for possible bad debts using the allowance method. When an actual
bad debt occurs, what effect does it have on the accounting equation?
130.
Which of the following is recorded by a credit to Accounts Receivable?
131.
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?
132.
At the beginning of 2018, the balance in Jackson Enterprises’ Allowance for Uncollectible
Accounts was $31,800. During 2018, the company wrote off $38,000 of accounts
receivable. Writing off the individual bad debts would include a:
133.
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 of actual bad debts for the year?
134.
Collections of accounts receivable that previously have been written off are credited to:
135.
A company collects an account receivable previously written off. Indicate how this
transaction would affect (1) assets, (2) stockholders‘ equity, and (3) revenues.
136.
The direct write-off method is used when:
137.
Which method is not allowed under Generally Accepted Accounting Principles for the
purpose of accounting for uncollectible accounts?
138.
The direct write-off method is not normally an acceptable method for GAAP because it
fails to report:
139.
The direct write-off method is generally not permitted for financial reporting purposes
because:
140.
Which accounting concept does the direct write-off method violate?
141.
If the direct write-off method is used to account for uncollectible accounts, which of the
following statements is false?
142.
Under the direct write-off method, what adjustment is made at the end of the year to
account for possible future bad debts?
143.
Under the direct write-off method, what adjustment is made at the time an actual bad
debt occurs?
144.
The distinction between the direct write-off method and the allowance method is:
145.
The direct write-off method is an acceptable method for what purpose?
146.
The primary difference between a note receivable and an account receivable is:
147.
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.
148.
A note receivable is reported in the balance sheet:
149.
Suppose a customer is unable to pay its account on time, so the company accepts a six–
month interest-bearing note receivable to replace the customer’s account receivable. What
effect will accepting the note receivable have on the company’s financial statements at
the time of acceptance?
150.
Suppose a customer is unable to pay its account on time, so the company accepts a six–
month interest-bearing note receivable to replace the customer’s account receivable. Over
the next six months, what effect will accepting the note receivable have on the company’s
financial statements?
151.
Hughes Aircraft sold a four-passenger airplane for $380,000, receiving a $50,000 down
payment and a 12% note for the balance. This transaction would include a:
152.
On February 1, 2018, Middleton Corp. lends cash and accepts a $1,000 note receivable
that offers 12% interest and is due in six months. How much interest revenue will
Middleton Corp. report during 2018?
153.
On February 1, 2018, Sanger Corp. lends cash and accepts a $2,000 note receivable that
offers 10% interest and is due in six months. What would Sanger record on August 1, 2018,
when the borrower pays Sanger the correct amount owed?
A.
Cash
2,000
Interest Revenue
100
Notes Receivable
2,100
B.
Cash
2,100
Notes Receivable
2,100
C.
Cash
2,100
Interest Revenue
100
Notes Receivable
2,000
D.
Cash
2,200
Notes Receivable
2,200
154.
On September 1, 2018, Middleton Corp. lends cash and accepts a $1,000 note receivable
that offers 12% interest and is due in six months. How much interest revenue will
Middleton Corp. report during 2018?
155.
On August 1, 2018, Turner Manufacturing lends cash and accepts a $6,000 note receivable
that offers 8% interest and is due in nine months. How would Turner record the year-end
adjustment to accrue interest in 2018?
A.
Interest Revenue
360
Interest Receivable
360
B.
Interest Receivable
480
Interest Revenue
480
C.
Interest Receivable
360
Interest Revenue
360
D.
Interest Receivable
200
Interest Revenue
200
156.
On September 1, 2018, Middleton Corp. lends cash and accepts a $1,000 note receivable
that offers 12% interest and is due in six months. How much interest revenue will
Middleton Corp. report during 2019?