Chapter 9 LearnSmart Bonus
The allowance for doubtful accounts is a(n) (current/contra/opposite) asset account and has a normal credit balance.
1. Contra
A company estimates that $1,000 of its accounts receivable is uncollectible at the end of the period and will make the following adjusting entry: (Check all that apply).
1. Debit to Bad Debts Expense for $1,000 2. Credit to Allowance for Doubtful Accounts
The allowance for doubtful accounts is a contra asset account that equals:
1. total uncollectible accounts
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?
1. $0
Lani Co. uses the allowance method to account for bad debts. At the end of the year, their unadjusted trial balance shows an accounts receivable balance of $400,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,200,000. Based on history, Lani estimates that bad debts will be 1% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:
1. $4,400 2. $400,000 x 1% = 4,000 + 400 debit balance = $4,400
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:
1. $500 2. $40,000 x 2%=800-300=$500
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:
1. 5,000
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:
1. 7,500 2. $1,500,000x.005=$7,500.
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.
1. Aging of receivables
A company has $150,000 of credit sales during the year and estimates that $1,000 of its accounts receivable will be uncollectible. The adjusting entry will include a credit to:
1. Allowance for Doubtful Accounts
At year-end, Avis Company estimates that $2,000 of its accounts receivable balance is uncollectible. Avis uses the allowance method to account for bad debts. The entry to record this adjusting entry would include a credit to:
1. Allowance for Doubtful Accounts
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:
1. Allowance for Doubtful Accounts
Acel Co. uses the allowance method to account for bad debts. In January, Acel determined that it could not collect $400 from CTR, Inc. and wrote the balance off. On October 21, Acel received a check for $400 from CTR. The entries to record the receipt of cash on October 21 would include a debit to:
1. Cash 2. Accounts Recievable
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 the uncollectible balance will include a (debit/credit)______ to the Allowance for Doubtful Accounts.
1. Debit
True or false: The direct write-off method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.
1. False
The advantages of using the allowance method to account for bad debts include which of the following? (Check all that apply.)
1. Reports accounts receivable balance at the estimated amount to be collected 2. Matches expenses in the same period with the related sales
The_________________ of accounts receivable method uses several percentages to estimate the allowance.
1. 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.
1. aging of accounts receivable
On December 31, DVS Company estimates that $2,500 of its accounts receivable balance is uncollectible. DVS uses the allowance method to account for bad debts. The entry to record this adjusting entry would include a: (Check all that apply.)
1. debit to Bad Debts Expense for $2,500. 2. credit to Allowance for Doubtful Accounts for $2,500.
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.
1. percentage of sales
The expected proceeds from accounts receivable, determined by taking accounts receivable less the allowance for doubtful accounts, is called:
1. realizable value
When an account previously written off is later collected, two journal entries are required. The first journal entry is to _____ the account, and the second journal entry is to record _____ of payment.
1. reinstate 2. receipt
The_____________ (allowance/direct write-off) method of accounting for bad debts records estimated bad debts expense in the period when the related sales are recorded.
Allowance
