Question

1) As Perry Materials Supply was preparing for the year-end close, their balances were as follows:

Perry Materials uses the aging method and has completed the following analysis of the accounts receivable:

Customer	1-30 Days	31-60 Days	61-90 Days	Over 90 Days	Total Balance
Johnson	$4,600	$3,200			$7,800
Hot Pots, Inc.			800	1,000	1,800
Potter	40,000	550			40,550
Harrison		3,600	900		4,500
Marx			2,000	50	2,050
Younger	65,000				65,000
Merry Maids	5,900				5,900
Acher	12,000	6,400			18,400
Totals	$127,500	$13,750	$3,700	$1,050	$146,000
Uncollectible percentage	2%	10%	20%	40%
Estimated uncollectible amount	$2,550	$1,375	$740	$420	$5,085

What will the final balance in the Allowance account be, after adjusting for uncollectible account expense?

A) $2,550

B) $11,285

C) $5,085

D) $11,285

2) Accounts receivable has a balance of $16,000 and the Allowance for uncollectible accounts has a credit balance of $1,700.  What is Net accounts receivable before and after a $60 account receivable is written off?

A) $14,300 before and $14,240 after

B) $14,300 before and $14,300 after

C) $16,000 before and $15,940 after

D) $16,000 before and $16,000 after

3) At January 1, Davidson Services has the following balances:

During the year, Davidson has $104,000 of credit sales, collections of $100,000, and write-offs of $1,400.

Davidson records Uncollectible accounts expense at the end of the year using the percent-of-sales method, and applies a rate of 1.1%, based on past history.

Prior to the year-end entry to adjust the Uncollectible accounts expense, what is the balance in Accounts receivable?

A) $2,600

B) $11,600

C) $4,000

D) $13,000

4) At January 1, Everbright Sales has the following balances:

During the year, Everbright has $150,000 of credit sales, collections of $140,000, and write-offs of $3,000. Everbright records Uncollectible accounts expense at the end of the year using the aging method.  At the end of the year, the aging analysis produces a figure of $1,900, being the estimate of uncollectible accounts at end of year.

Before the year-end entry to adjust the Uncollectible accounts expense is made, what is the balance in the Uncollectible accounts expense?

A) Debit of $1,400

B) Credit of $1,944

C) Zero balance

D) Credit of $544

5) A company uses the direct write-off method to account for uncollectible receivables.  Which of the following is included in the entry to write off an uncollectible account?

A) A debit to Uncollectible account expense

B) A debit to the customer's Account receivable

C) A credit to the Allowance for uncollectible accounts

D) No entry is made to write off uncollectible accounts.

6) Archer Company and Zorro Company both have significant amounts of accounts receivable at any time, and both experience uncollectible accounts from time to time.  Archer uses the percent-of-sales method to account for uncollectible accounts, and Zorro uses the direct write-off method.  Which of the following statements is FALSE?

A) Zorro Company's method complies with GAAP.

B) Archer Company's method will provide better matching of revenues and expenses.

C) Archer Company's net income is more accurate due to their accounting method.

D) Zorro Company's method does not provide good matching of revenues and expenses.

7) Archer Company has significant amounts of accounts receivable, and experiences uncollectible accounts from time to time.  Archer uses the aging method to account for uncollectible accounts.  When Archer Company writes off an uncollectible receivable, what is the effect of that single transaction?

A) It will reduce net income.

B) It will have no effect on net income.

C) It will increase total assets of the company.

D) It will generate negative cash flow.

8) Which of the following is NOT one of the benefits of a business accepting credit cards from their customers?

A) The business doesn't take the risk of the customer failing to pay.

B) The business can attract more customers and more sales.

C) The business earns a higher profit on credit card sales than cash sales.

D) The business does not have to check the credit ratings of customers.

9) On which of the following dates does a three-month note dated November 12 mature?

A) February 10

B) February 12

C) February 13

D) February 11

10) What is the maturity value of a 3-month, 12% note for $20,000?

A) $20,000

B) $22,400

C) $21,200

D) $20,600

Answer 1

1)

Option C - The total amount of estimated uncollectible receivables (There is no opening balance given)

2)

Option B - The net value of accounts receivable will be $14,300 before and after such written off.

Before written off = $16,000-$1,700 = $14,300

After written off = $($16,000-$60) - ($1,700-$60) = $14,400

3)

Option A - $2,600

There are no opening balances given, so the balance in Accounts receivable prior to any year end adjustment entry = $104,000 - $100,000 - $1,400 = $2,600

4)

Option C - Zero balance

There are no opening balances given, so the balance is uncollectible expense account at the year end before making any adjustment entry for the year using aging method is zero balance. As no entry is made in that account)

5)

Option A - Uncollectible expense account is debited

And the credit will be given to Accounts receivable account

6)

Option A - Direct write off method doesn't comply with GAAP.

7)

Option B - It will have no effect on net income

The amount of such write off will reduce the allowance account (liabilities) receivables (asset) account

8)

Option C -

The business will not earn higher profits on sles made through a credit card than the cash sales. So that statement is false

9)

Option B - The three months note dated November b12 will mature on February 12

10)

Option D

Interest on note = $20,000 x 12% x 3/12 = $600