ACC200 Lesson 5

Calculate the amount of gross margin given the following information: Sales Revenues $150,000 Cost of Goods Sold $90,000 Sales Discounts $3,000 Selling Expenses $25,000 Sales Returns and Allowances $5,000 Administrative Expenses $15,000

$ 52,000

Assume uncollectible accounts receivable are estimated at 5% of a $100,000 ending balance of accounts receivable and the allowance for uncollectible accounts receivable before any year-end adjustment amounted to a $1,500 debit balance. Given this information, determine the net realizable value of accounts receivable that should be reflected on the balance sheet at the end of the year.

$ 95,000

An overstatement of Bad Debt Expense in a particular year is typically corrected by

understating the expense in the following year

If a merchandiser accepts valid customer VISA cards as payment for legitimate merchandise sales, the merchandiser will typically have some bad debt expense arising from such sales transactions.

False

Sales Discounts is a contra-revenue account that typically has a credit balance before closing entries at the end of an accounting period.

False

Assume a $1,000 sale is made on account to a customer with terms of 2/10,n/30 and is subsequently collected net of the discount within ten days of the sale. If the receivable had been originally recorded at the gross sales amount of $1,000, the journal entry to record the cash collection would include a debit to

Sales Discounts for $20

The Allowance for Uncollectible Accounts Receivable account should always have a balance following the year-end adjusting entries that is equal to the amount of estimated uncollectible accounts receivable at year-end.

True

Under GAAP, revenues are to be recognized in the period in which those revenues are earned and not necessarily in the period in which cash is actually received from a customer.

True

Under GAAP, the expense associated with the uncollectibility of accounts receivable is typically calculated and recorded based upon estimations of uncollectibility.

True

Assuming that all customer returns of merchandise are honored with a full cash reimbursement or full credit on account regardless of the condition of the returned merchandise, a customer return of used and worthless merchandise previously sold at a profit will reduce the merchandiser's net income by

the amount of the original sales price of the merchandise