Question

Question 11 2.5 pts

Cost of Goods Sold is calculated on the:

Income Statement.

Statement of Owner's Equity.

Post-Closing Trial Balance.

Trial Balance.

 

Question 12 2.5 pts

The current balance of Allowance for Doubtful Accounts is considered when calculating the current period's Bad Debts Expense under the following approach:

Direct write-off method

Income statement approach

All of these answers are correct.

Balance sheet approach

 

Question 13 2.5 pts

Joe's Auto Repair estimates that approximately 3% of net credit sales are uncollectible. Joe's calculates Bad Debts Expense using the:

gross method.

direct write-off method.

income statement method.

balance sheet method.

 

Question 14 2.5 pts

Gross Profit equals:

Sales - Sales Returns and Allowances - Sales Discounts - Cost of Goods Sold.

Cost of Goods Sold - Operating Expenses.

Cost of Goods Sold - Other Expenses.

Net sales - Net Purchases.

 

Answer 1

1. Cost of goods sold is calculated in the INCOME STATEMENT.

(REASON: Income statement shows profit calculations which is Revenue-Cost of Goods sold. Hence under Income statement)

2. The current balance of Allowance for Doubtful Accounts is considered when calculating the current period's Bad Debts Expense under the INCOME STATEMENT METHOD

3. Joe's Auto Repair estimates that approximately 3% of net credit sales are uncollectible. Joe's calculates Bad Debts Expense using the INCOME STATEMENT METHOD

INCOME STATEMENT METHOD

The allowance method of accounting for bad debts involves estimating uncollectible accounts at the end of each period and It provides better matching of expenses and revenues on the income statement and ensures that receivables are stated at their cash (net) realizable value on the balance sheet.

4. Gross Profit = Sales - Sales Return and allowance - Sales Discounts - Cost of Goods sold.