Ch 6 Acct Quizlet (Test 2)

Company X has $100,000 of sales this year, $50,000 of which were on account. Its current Accounts Receivable balance is $80,000 and its ADA balance is $2,500. It estimates that 5% of its accounts receivables will be uncollectible. What should Company X record for bad debt expense related to these accounts receivable? A. $1,500 B. $2,500 C. $4,000 D. $5,500

A. $1,500 (80,000 x 5%) - 2,500

Below are the key facts of a company's Note Receivable. How much interest income will the company record for 2001? - Issuance Date: 10/1/2001 - Due Date: 5/31/2002 - Face Amount: $1,000 - Interest Rate: 5% A. $12.50 B. $50 C. $350 D. $400

A. $12.50 $1,000 x 5% x (3/12) (Only include Oct-Dec for 2001's interest expense... the interest rate is an annual rate so you need to prorate it for the applicable months)

A retailer had the following quantity of inventory available for sale during January (prior to any sales being made) Jan 1 - Beginning Inventory - 10 units at $10 each Jan 5 - purchase - 20 units at $12 each Jan 7 - purchase - 15 units at $15 each The retailer sold 25 units in January (after all of the above purchases were made). All units sold during the period sold for a price of $20 each. Using the FIFO Inventory cost flow assumption, what is the COGS on January 31? A. $280 B. $345 C. $285 D. $220

A. $280 FIFO COGS: First units in were sold. Of the 25 units sold, 10 were the $10 units ($100) and the other 15 were the $12 units ($180). Total = $280

Which of the below methods generally overstates a company's net realizable value of its account receivables? A. Direct Write Off Method B. Allowance Method

A. Direct Write Off Method

Below are Olive Company's balances at the end of the year, prior to making final adjustments regarding uncollectible account/sales. The company uses the allowance method. The company uses the analysis of receivables method to calculate its bad debt expense. It estimates that 2% of its accounts receivable balance at 12/31/20 will not be collected. - AR Balance @ 12/31/20: $700,000 - Allowance for doubtful Accounts balance @ 12/31/20: $10,000 - Cash Sales during 2020: $200,000 - Credit Sales during 2020: $900,000 - No bad debt expense has yet been recorded this year. (the $10,000 ADA balance relates to a prior year's sales) What will the company record for this? A. Increase allowance for Doubtful Accounts; Decrease RE B. Decrease Allowance for Doubtful accounts; Increase RE C. Decrease Accounts Receivable; Decrease RE D. Decrease Accounts Receivable; Decrease Allowance for Doubtful Accounts

A. Increase allowance for Doubtful Accounts; Decrease RE

True or False: The net realizable value of accounts receivable indicates the value of accounts receivable that a company anticipates collecting from customers A. True B. False

A. True

A retailer had the following quantity of inventory available for sale during January (prior to any sales being made) Jan 1 - Beginning Inventory - 10 units at $10 each Jan 5 - purchase - 20 units at $12 each Jan 7 - purchase - 15 units at $15 each The retailer sold 25 units in January (after all of the above purchases were made). All units sold during the period sold for a price of $20 each. Using the FIFO Inventory cost flow assumption, what is the Gross Profit on January 31? A. $280 B. $220 C. $155 D. $500

B. $220 GP = Sales - COGS Sales = 25 units x $20 = $500 GP = $500 - $280 = $220

A retailer had the following quantity of inventory available for sale during January (prior to any sales being made) Jan 1 - Beginning Inventory - 10 units at $10 each Jan 5 - purchase - 20 units at $12 each Jan 7 - purchase - 15 units at $15 each The retailer sold 25 units in January (after all of the above purchases were made). All units sold during the period sold for a price of $20 each. Using the LIFO Inventory cost flow assumption, what is the COGS on January 31? A. $280 B. $345 C. $285 D. $220

B. $345 LIFO COGS: last units in were sold. Of the 25 units sold, 15 were the $15 units ($225) and the other 10 were the $12 unitus ($120). Total = $345

Below are Olive Company's balances at the end of the year, prior to making final adjustments regarding uncollectible account/sales. The company uses the allowance method. The company uses the analysis of receivables method to calculate its bad debt expense. It estimates that 2% of its accounts receivable balance at 12/31/20 will not be collected. - AR Balance @ 12/31/20: $700,000 - Allowance for doubtful Accounts balance @ 12/31/20: $10,000 - Cash Sales during 2020: $200,000 - Credit Sales during 2020: $900,000 - No bad debt expense has yet been recorded this year. (the $10,000 ADA balance relates to a prior year's sales) What amount of bad debt expense should the company record? A. $18,000 B. $4,000 C. $24,000 D. $14,000

B. $4,000

Company B deems its receivable from Company X is entirely uncollectible and should be written off. What should company B record if it uses the Direct Write Off Method? A. Dec Accounts Receivable; Inc RE B. Dec Accounts Receivable; Dec RE C. Dec Accounts Receivable; Dec allowance for doubtful accounts D. Dec Accounts Receivable; Inc Allowance for doubtful accounts

B. Dec Accounts Receivable; Dec RE

Alex Co provided services to Hart Co for $5,000 and provided Hart Co 30 days to pay. On day 30, Hart still has not paid. Six months later, Hart closes its business and files bankruptcy. Alec Co decides this account receivable should be written off. What should Alex Co record for this write-off if it uses the direct Write-Off method? A. Inc allowance for doubtful accounts and dec retained earnings (related to bad debt expense) B. Dec accounts receivable and dec retained earnings (related to bad debt expense) C. Dec accounts receivable and dec allowance for doubtful accounts D. Inc accounts receivable and Inc retained earnings (related to bad debt expense)

B. Dec accounts receivable and dec retained earnings (related to bad debt expense)

A retailer had the following quantity of inventory available for sale during January (prior to any sales being made) Jan 1 - Beginning Inventory - 10 units at $10 each Jan 5 - purchase - 20 units at $12 each Jan 7 - purchase - 15 units at $15 each The retailer sold 25 units in January (after all of the above purchases were made). All units sold during the period sold for a price of $20 each. Using the LIFO Inventory cost flow assumption, what is the Gross Profit on January 31? A. $280 B. $220 C. $155 D. $500

C. $155 Gross Profit = sales - cogs sales = 25 units x $20 = $500 GP =$500 - $345 = $155

A retailer had the following quantity of inventory available for sale during January (prior to any sales being made) Jan 1 - Beginning Inventory - 10 units at $10 each Jan 5 - purchase - 20 units at $12 each Jan 7 - purchase - 15 units at $15 each The retailer sold 25 units in January (after all of the above purchases were made). All units sold during the period sold for a price of $20 each. Using the FIFO Inventory cost flow assumption, what is the Ending Inventory on January 31? A. $280 B. $345 C. $285 D. $220

C. $285 FIFO EI: First units in were sold so the remaining inventory were the last ones purchased. There's 45 units total, we sold 25, so there 20 left. Of the 20 left, 15 came from the $15 units ($225) and the other 5 came from the $12 units ($60).

Company X has $100,000 of sales this year, $50,000 of which were on account. Its current Accounts Receivable balance is $80,000 and its ADA balance is $2,500. It estimates that 5% of its accounts receivables will be uncollectible. What will the Allowance for Doubtful Accounts balance be after accounting for this estimate? A. $1,500 B. $2,500 C. $4,000 D. $5,500

C. $4,000 (80,000 x 5%)

Company B deems its receivable from Company X is entirely uncollectible and should be written off. What should company B record if it uses the Allowance Method? (we can assume the company already made its bad debt expense estimate) A. Dec Accounts Receivable; Inc RE B. Dec Accounts Receivable; Dec RE C. Dec Accounts Receivable; Dec allowance for doubtful accounts (closer to $0) D. Dec Accounts Receivable; Inc Allowance for doubtful accounts (further from $0)

C. Dec Accounts Receivable; Dec allowance for doubtful accounts (closer to $0)

Alex Co provided services to Hart Co for $5,000 and provided Hart Co 30 days to pay. On day 30, Hart still has not paid. Six months later, Hart closes its business and files bankruptcy. Alec Co decides this account receivable should be written off. What should Alex Co record to write-off the receivable if it uses the Allowance Method (assuming Alex Co has already performed an estimate of uncollectible accounts)? A. Inc allowance for doubtful accounts and dec retained earnings (related to bad debt expense) B. Dec accounts receivable and dec retained earnings (related to bad debt expense) C. Dec accounts receivable and dec allowance for doubtful accounts D. Inc accounts receivable and Inc retained earnings (related to bad debt expense)

C. Dec accounts receivable and dec allowance for doubtful accounts

Below are Olive Company's balances at the end of the year, prior to making final adjustments regarding uncollectible account/sales. The company uses the allowance method. The company uses the analysis of receivables method to calculate its bad debt expense. It estimates that 2% of its accounts receivable balance at 12/31/20 will not be collected. - AR Balance @ 12/31/20: $700,000 - Allowance for doubtful Accounts balance @ 12/31/20: $10,000 - Cash Sales during 2020: $200,000 - Credit Sales during 2020: $900,000 - No bad debt expense has yet been recorded this year. (the $10,000 ADA balance relates to a prior year's sales) What will the ending balance of ADA be after the company records the above? A. $18,000 B. $4,000 C. $24,000 D. $14,000

D. $14,000

A retailer had the following quantity of inventory available for sale during January (prior to any sales being made) Jan 1 - Beginning Inventory - 10 units at $10 each Jan 5 - purchase - 20 units at $12 each Jan 7 - purchase - 15 units at $15 each The retailer sold 25 units in January (after all of the above purchases were made). All units sold during the period sold for a price of $20 each. Using the LIFO Inventory cost flow assumption, what is the Ending Inventory on January 31? A. $280 B. $345 C. $285 D. $220

D. $220 LIFO EI: Last Units in were sold so the remaining inventory were the first ones purchased. There's 45 units total, we sold 25, so there's 20 left. Of the 20 left, 10 came from the $10 units ($100) and the other 10 came from the $12 unites ($120). = $220

Alex Co provided services to Hart Co for $5,000 and provided Hart Co 30 days to pay. On day 30, Hart still has not paid. Six months later, Hart closes its business and files bankruptcy. Alex Co decides this account receivable should be written off. Then, a few months after that, Hart's bankruptcy negotiations are complete and it is able to pay Alex Co $3,000. What should Alex Co record to reinstate the receivable just prior to the collection (still assuming Allowance Method)? A. Inc allowance for doubtful accounts and dec retained earnings (related to bad debt expense) B. Dec accounts receivable and dec retained earnings (related to bad debt expense) C. Dec accounts receivable and dec allowance for doubtful accounts D. Inc accounts receivable and Inc allowance for doubtful accounts

D. Inc accounts receivable and Inc allowance for doubtful accounts

Alex Co provided services to Hart Co for $5,000 and provided Hart Co 30 days to pay. On day 30, Hart still has not paid. Six months later, Hart closes its business and files bankruptcy. Alec Co decides this account receivable should be written off. Then, a few months after that, Hart's bankruptcy negotiations are complete and it is able to pay Alex Co $3,000. What should Alex Co record to reinstate the receivable just prior to the collection (still assuming Direct Write-Off Method)? A. Inc allowance for doubtful accounts and dec retained earnings (related to bad debt expense) B. Dec accounts receivable and dec retained earnings (related to bad debt expense) C. Dec accounts receivable and dec allowance for doubtful accounts D. Inc accounts receivable and Inc retained earnings (related to bad debt expense)

D. Inc accounts receivable and Inc retained earnings (related to bad debt expense)

During a period of consistently increasing inventory costs, the method of inventory costing that will result in lower cost of goods sold is: a. FIFO b. average cost c. LIFO d. Inventory costing method won't affect COGS

a. FIFO