Question

1. The adjusted entry was done as of December 30th, 2020. As a result, prepaid rent account was decreased and correct rent expense was recorded. The mentioned entry had the following effect on the Balance Sheet equation

A. Decrease in Assets, Decrease in Equity

B. Decrease in Assets, Decrease in Liability

C. Decrease in Assets, Increase in Equity

D. No change in Assets, Equity and Liabilities

2. On December 31, 2020, FunAccounting Company's Accounts Receivable balance was $10,000 and the balance in the Allowance for Doubtful Accounts was $3,000 and Bad debt expense for 2020 was 1,000. What was net realizable value of accounts receivable as of December 31, 2020

A. 7,000

B. 9,000

C. 10,000

D. 6,000

3. An aging of a company's accounts receivable indicates that $11,000 is estimated to be uncollectible. If the Allowance for Doubt Accounts has a $3,500 balance already, the adjustment to record bad (uncollectible) debts for period will require a(n):

A. Increase to Bad Debt Expense for $7,500

B. Decrease in Bad Debt Expense for $7,500

C. Increase to Allowance for Doubtful Accounts for $11,000

D. Increase to Bad Debt Expense for $11,000

E. Decrease in Allowance for Doubtful Accounts for $7,500

Answer 1

1. The adjusted entry was done as of December 30th, 2020. As a result, prepaid rent account was decreased and correct rent expense was recorded. The mentioned entry had the following effect on the Balance Sheet equation

Correct Answer = Option A. Decrease in Assets, Decrease in Equity
Decrease in Assets = Decrease in prepaid Rent
Decrease in equity = Increase in Insurance expense

2. On December 31, 2020, FunAccounting Company's Accounts Receivable balance was $10,000 and the balance in the Allowance for Doubtful Accounts was $3,000 and Bad debt expense for 2020 was 1,000. What was net realizable value of accounts receivable as of December 31, 2020

Correct Answer = Option A. 7,000
Net Value = $ 10000 – 3000 allowance balance = $ 7000

3. An aging of a company's accounts receivable indicates that $11,000 is estimated to be uncollectible. If the Allowance for Doubt Accounts has a $3,500 balance already, the adjustment to record bad (uncollectible) debts for period will require a(n):

Correct Answer = Option A. Increase to Bad Debt Expense for $7,500 [$11000 – 3500]