Accounting Final Exam Review Pt. 2

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21.) All of the following bank reconciliation items would result in an adjusting entry on the company's books except

a. interest earned.
b. deposits in transit.
c. fee for collection of note by bank.
d. NSF check of customer.

b. deposits in transit.

30.) Accounts receivable are valued and reported on the balance sheet

a. in the investment section.
b. at gross amounts less sales returns and allowances.
c. at cash realizable value.
d. only if they are not past due.

c. at cash realizable value.

31. Three accounting issues associated with accounts receivable are

a. depreciating, returns, and valuing.
b. depreciating, valuing, and collecting.
c. recognizing, valuing, and accelerating collections.
d. accrual, bad debts, and accelerating collections.

c. recognizing, valuing, and accelerating collections.

32.) Larson Company on July 15 sells merchandise on account to Stuart Co. for $1,000, terms 2/10, n/30. On July 20 Stuart Co. returns merchandise worth $400 to Larson Company. On July 24 payment is received from Stuart Co. for the balance due. What is the amount of cash received?

a. $600
b. $588
c. $580
d. $1,000

b. $588 (1000-400), 600*.02, 600-12=588

33.) The Allowance for Doubtful Accounts is necessary because

a. when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.
b. uncollectible accounts that are written off must be accumulated in a separate account.
c. a liability results when a credit sale is made.
d. management needs to accumulate all the credit losses over the years.

a. when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.

34.) The matching principle

a. requires that all credit losses be recorded when an individual customer cannot pay.
b. necessitates the recording of an estimated amount for bad debts.
c. results in the recording of a known amount for bad debt losses.
d. is not involved in the decision of when to expense a credit loss.

b. necessitates the recording of an estimated amount for bad debts.

35.) If the amount of uncollectible account expense is overstated at year end

a. net income will be overstated.
b. stockholders' equity will be overstated.
c. Allowance for Doubtful accounts will be understated.
d. net Accounts Receivable will be understated.

d. net Accounts Receivable will be understated.

36.) When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when

a. a sale is made.
b. an account becomes bad and is written off.
c. management estimates the amount of uncollectibles.
d. a customer's account becomes past due.

c. management estimates the amount of uncollectibles.

37.) An aging of a company's accounts receivable indicates that $4,000 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 Debts Expense for $4,000.
b. debit to Allowance for Doubtful Accounts for $2,800.
c. debit to Bad Debts Expense for $2,800.
d. credit to Allowance for Doubtful Accounts for $4,000.

c. debit to Bad Debts Expense for $2,800.

38.) An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a

a. debit to Bad Debts Expense for $4,000.
b. debit to Allowance for Doubtful Accounts for $5,200.
c. debit to Bad Debts Expense for $5,200.
d. credit to Allowance for Doubtful Accounts for $4,000.

c. debit to Bad Debts Expense for $5,200.

39.) To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

a. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
b. debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.
c. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
d. debit to Loss on Credit Sales and a credit to Accounts Receivable.

b. debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

40.) Manning Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Manning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?

a. Bad Debts Expense 10,000
Allowance for Doubtful Accounts 10,000
b. Bad Debts Expense 8,000
Allowance for Doubtful Accounts 8,000
c. Bad Debts Expense 8,000
Accounts Receivable 8,000
d. Bad Debts Expense 10,000
Accounts Receivable 10,000

b. Bad Debts Expense 8,000
Allowance for Doubtful Accounts 8,000

41.) Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $25,000. If the balance of the Allowance for Doubtful Accounts is $8,000 debit before adjustment what is the amount of bad debt expense for that period?

a. $25,000
b. $8,000
c. $33,000
d. $17,000

c. $33,000

42.) Laurs Company uses the percentage of receivables method for recording bad debts expense. The Accounts Receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Manning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?

a. Bad Debts Expense 10,000
Allowance for Doubtful Accounts 10,000
b. Bad Debts Expense 8,000
Allowance for Doubtful Accounts 8,000
c. Bad Debts Expense 6,000
Allowance for Doubtful Accounts 6,000
d. Bad Debts Expense 12,000
Accounts Receivable 12,000

c. Bad Debts Expense 6,000
Allowance for Doubtful Accounts 6,000

(200,000*.04)-2000=6000

43.) Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 credit before adjustment, what is the balance after adjustment?

a. $7,000
b. $21,000
c. $28,000
d. $35,000

c. $28,000

44.) Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 debit before adjustment, what is the amount of bad debt expense for the period?

a. $7,000
b. $21,000
c. $28,000
d. $35,000

d. $35,000 (28000+7000)

45.) In 2007 the Fitzu Co. had net credit sales of $750,000. On January 1, 2007, Allowance for Doubtful Accounts had a credit balance of $16,000. During 2007, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivable basis). If the accounts receivable balance at December 31 was $200,000 what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2007?

a. $20,000.
b. $34,000.
c. $36,000.
d. $30,000.

b. $34,000. (200,000*.1)+(16,000-30000)=34,000

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