Question

1. At the start of the current year, Dave Company had a credit balance in the Allowance for Doubtful Accounts of $6,000. At the end of the year, a provision of 2% of sales was made for estimated bad debts. Sales for the year were $2,000,000 and $37,000 of accounts receivable were written off as worthless. No recoveries of accounts previously written off were made dring the year. After the year-end bad debts adjustment, The year-end financial statements should show:

a. Allowance for Doubtful Accounts with a credit balance of $9,000

b. Allowance for Doubtful Accounts with a credit balance of $43, 000

c. Bad Debts expense of $37,000

d. Bad Debts expense of $77,000

e. None of the above

2. At December 31, before adjusting and closing the accounts had occurred, the Allowance for Doubtful Accounts of Andy Corporation showed a debit balance of $12,900. An Aging of the accounts receivable indicated the amount probably uncollectable to be $21,000. Under these circumstances, a year ending adjusting entry for bad debts expense would includ a:

a. Credit to the allowance for Doubtful Accounts for $33,900

b. Debit to Bad Debts Expense of $12,900

c. Debit to Bad debts Expense of $8,100

d. Credit to the Allowance for Doubtful Accounts for $21,000

e. None of the above

3. Which of the following results in the inventory being stated on the balance sheet at the most current acquisition costs?

a. LIFO

b.FIFO
c. Average cost

d. Specific identification

e. None of the above

4. Moon Company, which has an adequate amount in its Allowance for Doubtful Accounts, write off as uncollectable an account receivable from a bankrupt customer. This action will:

a. Reduce total current assets

b. Reduce net income for the period

c. Reduce the amount of owners equity

d. Reduce the amount of total accounts receivable

e. None of the above

5. The allowance for Doubtful represents:

a. The amount of uncollectable accounts written off to date

b. The difference between total credit sales and collections on credit sales

c. The difference between the gross value of accounts receivable and the amount of accounts receivable expected to be collected

d. Cash set aside to make up for bad debt losses

e. None of the above

6. A company which uses the direct write off method recognizes bad debts expense

a. As indicated by aging the accounts receivable at the end of the period

b. As a percentage of net sales during the period

c. As a percentage of net credit sales during the period

e. None of the above

7. A conceptual shortcoming in the direct write off method of accounting for bad debt is:

a. The direct method of properly matches revenues and expenses on the income statement

b. The direct method is easy to apply

c. The direct method does not properly value accounts receivable on the balance sheet

d. None of the above

8. During a period of steadily rising prices, which of the following cost flow assumptions is likely to result in reporting the highest gross profit?

a. LIFO

b. Specific identification

c. Average cost

d. FIFO

e. None of the above

9. During a period of steadily falling prices, which of the following cost flow assumptions is likely to result in reporting the highest amount of income taxes paid?

a. Specific identification

b. FIFO

c. LIFO

d. Average cost

e. None of the above

10. A LIFO reserve refers to:

a. An adjustment to convert LIFO cost of inventory to an average cost bias

b. The amount of inventory available for immediate delivery

c. The difference between the LIFO cost of an inventory and its current replacement cost

d. The tax savings resulting from the use of the LIFO inventory method

e. None of the above

11. Bass Company received a 60 day, 15% note for $9,000 on June 16. Which of the following statements is true?

a. Bass should record a total receivable due of $9,225 on June 16

b. The principal of the note plus the interest is due on August 16

c. The maturity value of this note is $9,225

d. Bass will receive $9,000 plus interest of $1,350 at maturity

e. None of the above

12. During January, Dartmouth Corporation had sales of $80,000 and a cost of goods avaiable for sale of $160,000. The company consistently earns a gross profit rate of 40%. Usin the gross profit method, the estimated inventory at January 31, amounts to

a. $112,000

b. $48,000

c. $128,000

d. $32,000

e. None of the above

13. The account "Purchases Returns and Allowances" would show up on the financial statement as:

a. A contra revenue account on the income statement

b. An owner's equity account on the balance sheet

c. A contra account in the cost of goods sold section on the income statement

d. An expense account included in the "other expenses" section of the income statement

e. None of the above

Answer 1

Dear student as per Chegg policy only first 4 parts can be answered. Thank you!!

1.

Allowance for doubtful accounts
Particulars	Amount ($)	Particulars	Amount ($)
Accounts receivable	37,000	By bal b/d	6,000
To bal c/d	9,000	Bad debts expense (2,000,000 * 2%)	40,000
	46,000		46,000

Therefore, the allowance for doubtful accounts has a credit balance of $9,000. Option a is correct.

2.

The adjusting entry of bad debts expense is as follows:

Bad debts expense---------------------------Dr-----------$33,900

Allowance for doubtful accounts-------Cr--------------$33,900

Where,

Bad debts expense = Debit balance of allowance account + Estimated uncollectible

= $12,900 + $21,000

= $33,900

Therefore, option a is correct.

3.

Under FIFO method inventory that comes first is sold first it means the earlier inventory charged to cost of goods sold first and the most recent inventory is included in the cost of ending inventory. Therefore, under FIFO method ending inventory is recorded at most recent acquisition cost.

Therefore, option b is correct.

4.

The journal entry to record the accounts receivable written-off is as follows:

Allowance for doubtful accounts---------------------Dr

Accounts receivable--------------------------------Cr

The above journal entry results in a decrease in assets account and decrease in contra assets account by the same amount hence, the total assets will remain same because the net realizable value of accounts receivable will not affected.

Therefore, option e is correct.