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Exam 15: Accounts Receivable and Uncollectible Accounts

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Question 21

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On December 31, prior to adjustments, the balance of Accounts Receivable is $28,000 and Allowance for Doubtful Accounts has a debit balance of $200. The firm estimates its losses from uncollectible accounts to be 5.5% of accounts receivable at the end of the year. The balance is Allowance for Doubtful Accounts after adjustment is

A) $1,740.
B) $1,340.
C) $200.
D) $1,540.

E) A) and D)
F) B) and C)

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Question 22

Multiple Choice

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On December 31, 2019, prior to adjustments, Accounts Receivable has a debit balance of $256,000 and the Allowance for Doubtful Accounts has a debit balance of $1,600. The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year. The amount of the adjusting entry needed to record the estimated losses from uncollectible accounts is:

A) $12,800
B) $12,100
C) $14,400
D) $11,200

E) All of the above
F) A) and B)

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Question 23

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Which of the following statements is not correct?

On December 31, prior to adjustments, the balance of Accounts Receivable is $28,000 and Allowance for Doubtful Accounts has a debit balance of $200. The firm estimates its losses from uncollectible accounts to be 5.5% of accounts receivable at the end of the year. The adjusting entry needed to record the estimated losses from uncollectible accounts is

Uncollectible Accounts Expense is classified as

Millie's Draperies uses the allowance method of recording bad debts. On June 13, the company concluded that the $200 account balance of Jane Murphy should be written off as uncollectible. The entry to write off Murphy's account will be:

The practice of estimating losses from uncollectible accounts before specific accounts become uncollectible is referred to as the ________ method.

A firm reported net credit sales of $355,000 for the year and an Accounts Receivable balance of $20,000 at year-end. Prior to adjustments, Allowance for Doubtful Accounts has a debit balance of $250. The firm estimates its losses from uncollectible accounts to be one-half of 1 percent of net credit sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for

Allowance for Doubtful Accounts is a liability account.

The Travel-Right Company uses the allowance method to provide for losses from uncollectible accounts. Record the following selected transactions on page 5 of a general journal, assuming the company also uses a cash receipts journal. Omit descriptions. Dec. 31 Recorded an adjusting entry for the estimated loss from uncollectible accounts for 2019. The estimate is based on 0.5 percent of total credit sales. The total of the credit sales for 2019 was $260,000. Allowance for Doubtful Accounts has a credit balance of $175. 2020 Apr. 15 Wrote off the account of Brandon Reed, amounting to $650, as uncollectible. Nov. 20 Received a check for $650 from Brandon Reed in payment of his account, which was written off on April 15. Dec. 31 Recorded an adjusting entry for the estimated loss from uncollectible accounts for 2020. The estimate is based on 0.5 percent of total credit sales. The total of the credit sales for 2020 was $224,000. Allowance for Doubtful Accounts has a debit balance of $200.

If the direct charge-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible?

On April 22, 2019, Raymond Repair Services Company received a check for $220 from Caroline Smith, whose $380 account was written off on January 15. In the accompanying letter, Smith apologized and said she probably would not be unable to pay any of the remaining balance. Prepare the general journal entry necessary. (Assume the firm uses the direct charge-off method. Also assume that the entry in the cash receipts journal has already been made.)

The estimated loss from uncollectible accounts can be based on the net credit sales for the year or the-------- balance at the end of the year.

Nigel Lighting uses the direct charge-off method of recording bad debts. On Sept. 4, the $300 account balance of Louis Blue was charged off. However, on November 15, Blue paid $70 of the amount previously written off. The entry to record the payment from Blue would include:

Allowance for Doubtful Accounts may, at times, have a debit balance.

Match the accounting description with description by entering the proper letter in the space provided.

The allowance method may be used to record bad debt losses for income tax purposes.

At the end of the current year, the trial balance of Tracey's Consulting Services included the accounts and balances shown below. Credit sales were $90,000. Returns and allowances on these sales were $1,000. Assume that the firm bases its estimate of the loss from uncollectible accounts on 0.4 percent of net credit sales. 1. What is the estimated loss from uncollectible accounts for the current year? 2. What is the amount of the adjusting entry for the estimated loss from uncollectible accounts?

The balance of Allowance for Doubtful Accounts is added to the balance of Accounts Receivable on the balance sheet.

When the estimate of the losses from uncollectible accounts is based on the aging method, the primary concern is proper valuation of the accounts receivable on the balance sheet.