KA2e_SelfStudy_Ch08

KA2e_SelfStudy_Ch08 -...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
File: ch08, Chapter 8: Reporting and Analyzing Receivables Multiple Choice 1. Kersee Company on June 15 sells merchandise on account to Soo Eng Co. for $1,000, terms 2/10, n/30. On June 20 Eng Co. returns merchandise worth $300 to Kersee Company. On June 24 payment is received from Eng Co. for the balance due. What is the amount of cash received? a) $700. b) $680. c) $686. d) None of the above. Ans: c Response A: The amount received on June 24 is $686. Because payment is made within the discount period of 10 days, the amount received is $700 ($1,000 – return of $300) minus the discount of $14 ($700 X 2%), or $686. Response B: The amount received on June 24 is $686. Because payment is made within the discount period of 10 days, the amount received is $700 ($1,000 – return of $300) minus the discount of $14 ($700 X 2%), or $686. Response C: Correct! Response D: The amount received on June 24 is $686. Because payment is made within the discount period of 10 days, the amount received is $700 ($1,000 – return of $300) minus the discount of $14 ($700 X 2%), or $686. 2. Net credit sales for the month are $800,000. The accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage of receivables basis. If the Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment, what is the balance after adjustment? a) $12,000. b) $7,000. c) $17,000. d) $31,000. Ans: a Response A: Correct! Response B: This amount represents the amount of the adjusting entry that would be required. The beginning balance of $5,000 plus a credit of $7,000 would result in the desired ending balance of $12,000. Response C: This amount would result if the $12,000 estimate were used as the amount for the adjusting entry. The $5,000 beginning balance plus a $12,000 credit would result in a $17,000 credit balance. But this is $5,000 more than the desired balance. Response D: The amount of the estimate from the percentage of receivables basis, in this case $12,000 ($160,000 X 7.5%), is the desired ending balance in the Allowance for Doubtful Accounts. 3. In 2007 Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2007, Allowance for Doubtful Accounts had a credit balance of $18,000. 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 receivables 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?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
a) $20,000. b)
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/22/2009 for the course BCOR 2000 taught by Professor Brush during the Spring '07 term at Colorado.

Page1 / 5

KA2e_SelfStudy_Ch08 -...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online