Question

1. The balance sheet account used to report the amount of accounts receivable that a company does not expect to collect is called ________.

A) net accounts receivable

B) allowance for uncollectible accounts

C) uncollectible accounts expense

D) bad debts expense

2. What is the effect on the accounting equation of writing off an uncollectible account of $75?

A) increase assets $75 and decrease liabilities $75

B) decrease assets $75 and decrease liabilities $75

C) decrease assets $75 and increase expense $75

D) no net effect on total assets

3. In 2011, Seven Seas sold $20,000 worth of merchandise on account. Its accountant estimated that $400 of that amount would be uncollectible. In 2011, Saki, a Japanese customer, purchased $500 of merchandise on account from Seven Seas. In 2012, Saki declared bankruptcy while still owing the $500. What is the amount of bad debts expense Seven Seas should report on

December 31, 2011?

A) $100

B) $400

C) $500

D) $900

4. In preparing the financial statements for January, the accountant for Team Shirts has compiled the following information: accounts receivable are $5,000; the amount estimated to be uncollectible is 10% of receivables; sales for the month were $43,000; and the balance in the allowance for uncollectible accounts is a positive $100. Using the accounts receivable allowance method, the amount of bad debts expense for January is ________.

A) $100

B) $500

C) $600

D) $4,300

5. What is the effect on the accounting equation when a company collects an account receivable?

A) Total assets increase, total liabilities increase, and total shareholders’ equity stays the same.

B) Total assets stay the same, total liabilities stay the same, and total shareholders’ equity stays the same.

C) Total assets decrease, total liabilities stay the same, and total shareholders’ equity decreases.

D) Total assets stay the same, total liabilities increases, and total shareholders’ equity decreases.

Answer 1

1.

The balance sheet account used to report the amount of accounts receivable that a company does not expect to collect is called B) allowance for uncollectible accounts.

2.

What is the effect on the accounting equation of writing off an uncollectible account of $75?

D) no net effect on total assets.

3.

What is the amount of bad debts expense Seven Seas should report on December 31, 2011?

B) $400

4.

Using the accounts receivable allowance method, the amount of bad debts expense for January is C) $600

5.

What is the effect on the accounting equation when a company collects an account receivable?

B) Total assets stay the same, total liabilities stay the same, and total shareholders’ equity stays the same.