Accounting - A/R CH. 7

Conroy Company uses the allowance method to account for bad debts. During the year, Conroy determined that a balance of $200 from Alegia Co. was uncollectible and wrote the balance off. What is the total decrease to net income related to this entry?

$0 (The decrease in net income occurs when bad debts is estimated (allowance account is increased). This entry reduces accounts receivable using the allowance account.)

Leo Co. uses the allowance method to account for bad debts. At the end of the year, Leo Co.'s accounts receivable balance is $25,000; allowance for doubtful accounts balance of $100 (credit); and sales of $500,000. Based on history, Leo estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:

$400 $25,000 x 2% = $500 desired ending balance in the allowance account. Subtract the beginning credit balance to determine the amount of the adjusting entry. $500 - $100 = $400.

Yates Co. uses the allowance method to account for bad debts. At the end of the period, Yate's unadjusted trial balance shows an accounts receivable balance of $10,000; allowance for doubtful accounts balance of $400 (credit); and sales of $500,000. Based on history, Yates estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of:

- $5000 Since this is based on a percentage of sales, you should simply multiply $500,000 x .01 = $5,000.

Ana Co. uses the allowance method to account for bad debts. At the end of the period, Ana's unadjusted trial balance shows an accounts receivable balance of $40,000; allowance for doubtful accounts balance of $300 (credit); and sales of $500,000. Based on history, Ana estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of:

- 500 $40,000 x 2% =800-300 =$500

Flash Co. uses the allowance method to account for bad debts. At the end of the year, Flash Co.'s unadjusted trial balance shows an accounts receivable balance of $45,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,500,000. Based on history, Flash estimates that bad debts will be 0.5% of sales. The entry to record estimated bad debts will include an debit to Bad Debts Expense in the amount of:

- 7500 (When the allowance method is based on sales, do not take into account the previous balance in the allowance account. $1,500,000x.005= $7,500.)

To record a customer's check in full payment for a sale that was made the prior month, the company should debit the ______ account.

- cash

Tunes Company determines that a customer balance of $250 from Able Co. is uncollectible. Tunes uses the allowance method to account for bad debts. The entry to write off Able's uncollectible balance will include a (debit/credit) ____________ to the Allowance for Doubtful Accounts.

- debit

In July, Lane Co. sells merchandise to Avery Co. on account. In August, Avery pays the balance in full. The entry that Lane will make to record the receipt of cash will include a credit to the Blank______ account

Accounts Recievable

Avia Company determines that a customer balance of $400 from Allia, Inc. is uncollectible. Avia uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a debit to:

Allowance for Doubtful Accounts

On December 31, Lee Company estimates that $1,000 of its accounts receivable balance is uncollectible. Lee Company uses the allowance method to account for bad debts. The adjusting entry to record this estimate will include a credit to:

Allowance for Doubtful Accounts

Iron Company collects cash in full from a customer who purchased merchandise last month on credit. To record the receipt of cash, Iron Company should make the following entries in the general journal. (Check all that apply.)

Debit to Cash Credit to Accounts Receivable

The (aging/percent) ___________ of accounts receivable method uses several percentages, based on long an account is past due, to estimate the allowance.

aging

The ______ method, also referred to as balance sheet method, uses balance sheet relations to estimate bad debts—mainly, the relationship between accounts receivable and the allowance account.

aging of accounts receivable The aging of accounts receivable method is one of the ways of computing the adjusting entry under the allowance method. The other way of computing the adjusting entry is based on percent of sales.

The ______ method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date.

aging of receivables

At period end, Bradon Company estimates that $1,200 of its accounts receivable balance is uncollectible. Bradon uses the allowance method to account for bad debts. The entry to record this adjusting entry would include a (debit/credit) ____________ to Allowance for Doubtful Accounts.

credit

In September, DK Company sells merchandise to Lions Company on credit. In October, Lions Company pays the balance in full. The entry to record the collection of cash by DK Company in October will include a (debit/credit) _________ to Accounts Receivable.

credit

The ______ method of estimating allowance for doubtful accounts is based on the idea that a given percent of a company's credit sales for the period are uncollectible.

percentage of sales

The expected proceeds from accounts receivable, determined by taking accounts receivable less the allowance for doubtful accounts, is called:

realizable value