Multiple Choice/Short Answer 10 questions, 4 points each
The following information is available for Reagan Company:
Allowance for doubtful accounts at December 31, 2005
Credit sales during 2006
Accounts receivable deemed worthless and written off during 2006
As a result of a review and aging of accounts receivable in early January 2007,
however, it has been determined that an allowance for doubtful accounts of
$9,500 is needed at December 31, 2006. What amount should Reagan record as
"bad debt expense" for the year ended December 31, 2006?
Balance in account after writeoff is 1,000 credit.
To get to new balance of 9,500 you
need to add 8,500.
Designated market value
is always the middle value of replacement cost, net realizable value, and
net realizable value less a normal profit margin.
should always be equal to net realizable value.
may sometimes exceed net realizable value.
should always be equal to net realizable value less a normal profit margin.
AJ Corporation, a manufacturer of ethnic foods, contracted in 2007 to purchase
500 pounds of a spice mixture at $5.00 per pound, delivery to be made in spring
of 2008. By 12/31/07, the price per pound of the spice mixture had risen to $5.60
per pound. In 2007, AJ should recognize
a loss of $2,500.
a loss of $300.
no gain or loss.
a gain of $300.
Because the price increased AJ actually will benefit from the contract.
because of conservatism, we do not recognize the gain (whereas we would
have recognized the loss).