Question

11. Wellington Corp. has outstanding Accounts Receivable totaling $500,000 as of December 31 and Sales on credit during the year of 1,000,000. Before adjusting entries, there is also a credit balance of $3,000 in the Allowance for Doubtful Accounts. If the con of its outstanding receivables will be uncollectible, what will be the amount of Bad Debt Expense recognized for the year? a. 12,000 b. 15,000 c. 18,000 d. 27,000 12. In a period of rising prices, the inventory method which tends to give the lowest Tax Expense is: a. Specific Identification b. First-in, First-out c. Last-in, First-out d. Weighted Average

Answer 1

11
Estimated Uncollectible accounts	15000	=500000*3%
Less: Allowance for Doubtful accounts	3000
Bad Debts expense	12000
Option A 12,000 is correct

12

In a period of rising price, Last-in, First-out gives lowest Income tax expense.

Under Last-in, First-out method, units purchased at a later date are assumed to be sold first.

As a result, units purchased at higher prices later would comprise Cost of goods sold which will decrease Net income and lead to lower Tax expense.

Option C Last-in, First-out is correct