Question

1.An aging of a company's accounts receivable indicates that $13.000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1.200 credit balance, the adjustment to record bad debts for the period will require a a. debit to Bad Debt Expense for $13,000. b. debit to Allowance for Doubtful Accounts for $11,800. c. debit to Bad Debt Expense for $11,800. d. credit to Allowance for Doubtful Accounts for $13,000. 2.Cost of goods sold is determined only at the end of the accounting period in a. a perpetual inventory system. b. a periodic inventory system. c. both a perpetual and a periodic inventory system. balanderiodie inventory system d. neither a perpetual nor a periodic inventory system. 3. Under a perpetual inventory system, acquisition of merchandise for resale is debited to the a. Inventory account. b. Purchases account. c. Supplies account. d. Cost of Goods Sold account. Cosmos Company on July 15 sells merchandise on account to Cajon Co. for $6,000, terms 2/10,n/30. On July 20 Cajon Co. returns merchandise worth $1,000 to Cosmos Company. On July 24 payment is received from Cajon Co. for the balance due. What is the amount of cash received? a $4,800 b. $4,900 c. $5,000 d. $6,000 5. The collection of a $6,000 account within the 3 percent discount period will result in a a. debit to Sales Discounts for $180. b. debit to Accounts Receivable for $5,820. c. credit to Cash for $5,820. d. credit to Accounts Receivable for $5,820. 6.During 2020, Wu Han Co. generated revenues of $95,000. The company's expenses were as follows: cost of goods sold of $47,000, operating expenses of $16,000 and a loss on the sale of equipment of $5,000. Wu Han's net income is a. $27,000 b. $32,000 c. $48,000. d. $95,000

Answer 1

Ans. 1	Option C
	Bad debt expense = Estimated uncollectibles - Credit balance of allowance for doubtful account
		$13,000 - $1,200
		$11,800
	*Bad debt expense account is debited and allowance for doubtful debts are credited with the
	calculated amount.
Ans. 2	Option B
	In periodic inventory system, all calculations are made at the end of an accounting period.
Ans. 3	Option A
	Inventory account is debited for the purchase of merchandise for resale under the perpetual
	inventory system.
Ans. 4	Option B
	Sales net of returns = Total sales - Sales return
	$6,000 - $1,000   =   $5,000
	Discount = $5,000 * 2%
	$100
	Cash received = Sales net of returns - Discount
	$5,000 - $100   = $4,900
Ans. 5	Option A
	Discount = $6,000 * 3%
	$180
	Cash ($6,000 - $180 = $5,820) and sales discount($180) is debited and accounts receivable are credited ($6,000).
Ans. 6	Option A
	Revenue		$95,000
	Less: Cost of goods sold		-$47,000
	Gross margin		$48,000
	Less: Operating expenses		-$16,000
	Operating income (EBIT)		$32,000
	Less: Ioss on sale of equipment		-$5,000
	Net income		$27,000