Question

8. The entry to record a write-off of an uncollectible account when using the direct write off method involves a debit to Allowance for Bad Debts b. debit to Accounts Receivable C. credit to Cash d. debits to Bad Debts Expense 9. A copy machine costs $45,000 when new and has accumulated depreciation of $44,000. Suppose you company sold the machine for $1,000. What is the result of the disposal transaction? a. No gain no loss b. Loss of $1,000 c. Gain of $1,000 d. Loss of $45,000 10. Your company sells $180,000 (selling price) of goods and collects sales of tax of 8%. What curre liability does the sales create? a Sales revenue of $194,400 b. Unearned Revenue of $194,400 c. Sales tax payable of $14,400. d. Sales revenue of $180,000

Answer 1

Question 8

Correct answer-----------(d) Debit to bad debts expense

In direct write off method Bad debts expense is debited and Accounts receivable will be credited so that accounts receivable balance is reduced.

Question 9

Correct answer-----------(a) No gain no loss

The machine is sold at book value hence there is no gain or loss

Gain or loss = Sales price - Book value

Gain or loss = (1000-1000) =$0

Book value = Purchase price Minus Accumulated depreciation

Book value = $45000-44000= $1000

Question 10

Correct answer-----------(c) Sales tax payable of $14,400

Sales tax @8% will be calculated on 180,000. = 180000 x 8%= $14400

Sales revenue is not a liability.