Quiz - Chapter 6

Quiz - Chapter 6 - doubtful accounts has a balance of...

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Quiz - Chapter 6 1. Suppose a firm uses the percentage of credit sales method for estimating bad debts expense. The firm has credit sales for the year of $200,000 and a balance of $80,000 in A/R. The firm estimates that 2% of its credit sales will never be collected. What is the bad debt expense for the year? a. $3,200 b. $1,600 c. $4,000 d. $3,600 2. Merry Maids, Inc. sell vacuum cleaners to Mackenzie Corp. for $1,000 each. Mackenzie Corp. pays Merry Maids with the company Visa card. Visa charges Merry Maids a 3% fee for all Visa sales. What is the net effect of this transaction on the accounting equation for Merry Maids? Assume no inventory/COGS effect. a. Increase assets $1,000; increase retained earnings $1,000 b. Decrease assets $1,000; decrease retained earnings $1,000 c. Increase assets $970; increase retained earnings $970 d. Decrease assets $970; decrease retained earnings $970 3. At the end of the year, before any adjustments are made, the accounting records for Whit Inc show a balance of $100,000 in A/R. The allowance for
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Unformatted text preview: doubtful accounts has a balance of $2,000. The company uses A/R (aging) to estimate bad debts expense. An analysis of A/R results in an estimate of $27,000 of uncollectible accounts. The bad debt expense on the income statment for the year would be: a. $27,000 b. $25,000 c. $23,000 d. $29,000 4. At the end of the year, before any adjustments are made, the accounting records for Whit Inc show a balance of $100,000 in A/R. The allowance for doubtful accounts has a balance of $2,000. The company uses A/R (aging) to estimate bad debts expense. An analysis of A/R results in an estimate of $27,000 of uncollectible accounts. Net realizable value of the receivables on the year-end balance sheet would be: a. $100,000 b. $75,000 c. $73,000 d. $27,000 5. Which method of estimating uncollectible receivables focuses on net credit sales? a. Aging Approach b. Percent-of-credit sales approach c. Net realizable value approach d. All of the above...
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This note was uploaded on 12/17/2010 for the course ACC 311 taught by Professor Charrier during the Fall '08 term at University of Texas.

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Quiz - Chapter 6 - doubtful accounts has a balance of...

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