Question

6. The following accounts were abstracted from Starr Co's unadjusted trial balance at December 31, 2016: Credit Debit $750,000 Accounts receivable Allowance for uncollectible accounts Net credit sales Starr estimates that 4.5% of the gross accounts receivable will become uncollectible. 8,000 $3,000,000 at December 31, 2016, the allowance for uncollectible accounts should After adjustment have a credit balance of A) S120,000. B) S112,000. C) $33,750. D) $30,000. 7. Wellington Corp, has outstanding accounts receivable totaling $1.27 million as of December 31 and sales on credit during the year of $6.4 million. There is also a credit balance of $3,000 in the allowance for doubtful accounts. If the company estimates that 1% of its net credit sales will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense? A) $12,700. B) $15,700. C) $61,000. D) $67,000. 8. What is the normal journal entry when writing-off an account as uncollectible under the allowance method? A) Debit Allowance for Doubtful Accounts, credit Accounts Receivable. B) Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. C) Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. D) Debit Accounts Receivable, credit Allowance for Doubtful Accounts. 9. Why are inventories included in the computation of net income? A) To determine cost of goods sold. B) To determine sales revenue. C) To determine merchandise returns. D) Inventories are not included in the computation of net income. 10. AG Inc. made a $15,000 sale on account with the following terms: 3/10, n/30. If the company uses the net method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? A) Debit Accounts Receivable for $14,700. B) Debit Accounts Receivable for $14,550 and Sales Discounts for $450. C) Debit Accounts Receivable for $14,550. D) Debit Accounts Receivable for $15,000 and Sales Discounts for $300.

Answer 1

solution: Q6 Allowance for uncollectible account balance 33750 (750000*4.5%) Q7 Allowance for doubtful account balance 67000 (6400000*190+3000) Q8 (since account is no more collectible, account receivable balance is reduced hence it is credited and allowance balance is also reduced hence debited.) A) Debit Allowance for doubtful accounts, credit accounts receivable 09 Why ir: inveri.ris induded in ihe..niipuiai į()n <yi noi: İnc()ine? (COGS-Beg. InventoryPurchases - Ending inventory) Q10 C) Debit account re cievable for $14550 (i.e 15000 (1-0.03)