Quiz - Chapter 6 with Solutions

Quiz - Chapter 6 with Solutions - Q uiz - Chapter 6 1....

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200,000 2% 4,000 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 Journal entry would be as follows:
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Cash or A/R from credit card company 970 Asset Discount - Credit Card 30 Contra-Revenue (Income Statement) Revenue 1,000 Revenue (Income Statement)
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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 with Solutions - Q uiz - Chapter 6 1....

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