Question

1.

Under the allowance method, when a specific account is written off

total assets will be unchanged.

net income will decrease.

total assets will increase.

total assets will decrease.

2.

Blossom Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $310000 and credit sales are $3110000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Blossom Company make if the Allowance for Doubtful Accounts has a credit balance of $3100 before adjustment?

Bad Debt Expense		9300
	Accounts Receivable		9300

Bad Debt Expense		9300
	Allowance for Doubtful Accounts		9300

Bad Debt Expense		12400
	Accounts Receivable		12400

Bad Debt Expense		12400
	Allowance for Doubtful Accounts		12400

3.

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $55000. If the balance of the Allowance for Doubtful Accounts is an $11000 debit before adjustment, what is the balance after adjustment?

$55000

$11000

$44000

$66000

4.

Novak Corp. does not ring up sales taxes separately on the cash register. Total receipts for February amounted to $42718. If the sales tax rate is 6%, what amount must be remitted to the state for February's sales taxes?

$2418

It cannot be determined.

$2563

$2410

5.

Splish's Boutique has total receipts for the month of $43890 including sales taxes. If the sales tax rate is 5%, what are Splish's sales for the month?

$41800

$41696

$43890

It cannot be determined.

6.

Sunland Company uses the percentage-of-receivables method for recording bad debt expense. The Accounts Receivable balance is $310000 and credit sales are $1240000. Management estimates that 6% of accounts receivable will be uncollectible. What adjusting entry will Sunland Company make if the Allowance for Doubtful Accounts has a credit balance of $3100 before adjustment?

Bad Debt Expense		12400
	Accounts Receivable		12400

Bad Debt Expense		6200
	Allowance for Doubtful Accounts		6200

Bad Debt Expense		21700
	Allowance for Doubtful Accounts		21700

Bad Debt Expense		15500
	Allowance for Doubtful Accounts		15500

Answer 1

1.

The answer is option A - Total Asset will unchnaged

The making the write off entry is

Allowance on doubt ful accounts Dr

Accounts Receivable

when making journal this is for amount already ommitted. So no impact on asset value and net income. When making entry the receivable balance and allowance balance reduced. So equal impact on balance sheet.

2.

The answer is option B

The entry will be

Bad Debt expense A/c 9300

Allowance on Doubt ful account.

Under percentage on receivable method the estimated amount will adjust with allowance account balance

Estimated balance = 310000 x 4% = 12400

Credit Balance = 3100

Then this credit balance will reduce from estimated amount. If has debit balance it will add with estimated amount.

3.

The answer is option D - 66000

The debit balance will add with the estmated value

55000 + 11000 = 66000

If has credit balance it will deduct.

4.

The answer is it cannot be determined.

The value mentioned there is not saying that its including or excluding tax. So it cant determined by the information received.

5.

The answer is option A - 41800

Here including tax = 43890

Tax rate = 5%

Then without tax will be = (43890/105) x 100

= 41800

Here = 105 = 100 + Tax Rate

6.

The answer is option D -

Bad Debt expense 15500

Allowance on doubt ful account 15500

The value found by

Accounts receiveble balance x 6% = 310000 x 6% = 18600

credit balance of allowance account = 3100

Then net balance = 18600 - 3100 = 15500

if allowance account has credit balance it will deduct with the estimated value and if has debit balance it will add with estimated value.