Fall 08 Exam II
In preparing its August 31, 2007 bank reconciliation, Adel Corp. has available the follow-ing
Balance per bank statement, 8/31/07
Deposit in transit, 8/31/07
Return of customer's check for insufficient funds, 8/30/07
Outstanding checks, 8/31/07
Bank service charges for August
At August 31, 2007, Adel's correct cash balance is
$21,650 + $3,900 – $2,750 = $22,800.
Which of the following methods of determining bad debt expense does not properly match
expense and revenue?
Charging bad debts with a percentage of sales under the allowance method.
Charging bad debts with an amount derived from a percentage of accounts receivable under the
Charging bad debts with an amount derived from aging accounts receivable under the allowance
Charging bad debts as accounts are written off as uncollectible.
Horvath Company has the following items at year-end:
Cash in bank
Short-term paper with maturity of 2 months
Horvath should report cash and cash equivalents of
$20,000 + $300 + $5,500 = $25,800.
Before year-end adjusting entries, Bass Company's account balances at December 31, 2007, for
accounts receivable and the related allowance for uncollectible accounts were $600,000 and $45,000,
respectively. An aging of accounts receivable indicated that $62,500 of the December 31 receivables
are expected to be uncollectible. The net realizable value of accounts receivable after adjustment is
$600,000 – $62,500 = $537,500.