Question

1) Fit City estimates it will collect $3,300 of the $3,525 owed by customers. The $3,300 or the estimated collectible amount is called:

1. the Bad Debts Allowance

2. the Net Realizable Value

3. the Gross Accounts Receivable

2) The Allowance for Doubtful Accounts is adjusted:

1. each time a customer's debt is satisfied.

2.   within one year of granting credit to a customer

3. at the end of each accounting period.

4) Using the aging method, estimated uncollectible accounts are $3,000. If the balance in the Allowance for Doubtful Accounts is a $600 debit before adjustment, what is the Bad Debts Expense adjustment for the period?

1.    $3,600

2. $2,400

3.   $600

5) Harry's Hardware estimates that approximately $1.75 out of every $100 of credit sales proves to be uncollectible. Harry calculates Bad Debts Expense using the:

1. aging the Accounts Receivable approach

2. balance sheet approach

3. income statement approach

6) The adjustment for bad debts using the percentage of receivables ignored the debit balance in the Allowance account. This error would cause:

1. total assets to be overstated

2. total liabilities to be understated

3. net income to be understated

7) Sylvia's, Inc., writes off a customer's accounts receivable of $700 using the allowance approach. As a result,

1. net assets increase

2. net assets remain unchanged

3. expenses increase

9) After aging the Accounts Receivable, it is estimated that $2,450 will not be collected and the allowance account has an existing debit balance of $300. If Accounts Receivable is $107,000, the net receivables would be:

1. $107,000

2. $106,900

3. $104,550

Answer 1

Answer (1) The Net realizable value Answer (2) At the end of each accounting period Answer (4) $2,400 Answer (5) Income statement approach Answer (6) Net income to be understated Answer (7) Expenses increases Answer (9) $104,550