Trade accounts receivable are valued and reported on the Statement of Financial Position.

at gross amounts less sales returns and allowances.

Under the allowance method, writing off an uncollectible account

affects only Statement of Financial Position accounts.

affects both Statement of Financial Position and income statement accounts.

affects only income statement accounts.

The collection of an account that had been previously written off under the allowance method of accounting for bad debts

does not affect income in the period it is collected.

will increase income in the period it is collected.

will decrease income in the period it is collected.

requires a correcting entry for the period in which the account was written off.

An aging of a company's accounts receivable indicates that RM8,000 are estimated to be uncollectible. If Allowance for Doubtful Debts Accounts has a RM1,100 credit balance, the adjustment to record bad debts for the period will require a

debit to Bad Debts Expense for RM6,900.

debit to Bad Debts Expense for RM8,000.

debit to Allowance for Doubtful Accounts for RM6,900.

credit to Allowance for Doubtful Debts Accounts for RM8,000.

A reasonable amount of uncollectible accounts is evidence

that the credit policy is too strict

that the credit policy is too lenient.

of poor judgments on the part of the credit manager.

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

debit to Bad Debts Expense and a credit to Allowance for Doubtful Debts Accounts.

debit to Accounts Receivable and a credit to Allowance for Doubtful Debts Accounts.

debit to Allowance for Doubtful Debts Accounts and a credit to Accounts Receivable.

debit to Loss on Credit Sales and a credit to Accounts Receivable.

Dayang Company uses the percentage of net credit sales method for recording bad debts expense. For the year, cash sales are RM500,000 and credit sales are RM2,000,000. Management estimates that 2% of the net credit sales is uncollectible. What adjusting entry will Dayang Company make to record the bad debts expense?

Dr. Bad Debts Expense RM40,000; Cr. Allowance for Doubtful Debts Accounts RM40,000

Dr. Bad Debts Expense RM50,000; Cr. Allowance for Doubtful Debts Accounts RM50,000

Dr. Bad Debts Expense RM40,000; Cr. Accounts Receivable RM40,000

Dr. Bad Debts Expense RM50,000; Cr. Accounts Receivable RM50,000

The direct write-off method of accounting for bad debts

does not require estimates of bad debt expenses.

is the preferred method under generally accepted accounting principles.

When the allowance method is used to account for uncollectible accounts, Bad Debt Expense is debited when

management estimates the amount of uncollectibles.

an account becomes bad debts and written off.

a customer's account becomes past-due.

When an account becomes uncollectible and must be written off,

Accounts Receivable should be credited.

Bad Debt Expense should be credited.

Allowance for Doubtful Debts Accounts should be credited.

Sales Revenue should be debited.

Under the direct write-off method of accounting for bad debts, Bad Debt Expense is debited

when an account is determined to be uncollectible.

when a credit sale is past due.

at the end of each accounting period.

whenever a pre-determined amount of credit sales have been made.

Two methods of accounting for bad debts are the

direct write-off method and the allowance method.

allowance method and the accrual method.

direct write-off method and the accrual method.

allowance method and the net realizable method.

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

debit to Bad Debt Expense and a credit to Allowance for Doubtful Debts Accounts.

debit to Accounts Receivable and a credit to Allowance for Doubtful Debts Accounts.

debit to Allowance for Doubtful Debts Accounts and a credit to Accounts Receivable.

debit to Loss on Credit Sales Revenue and a credit to Accounts Receivable.

Two basis for estimating uncollectible accounts are:

percentage of accounts receivables and percentage of net credit sales.

percentage of current assets and percentage of net credit sales.

percentage of assets and percentage of net credit sales.

percentage of accounts receivables and percentage of total revenue.

Valli Company uses the percentage of net credit sales method for recording bad debts expense. For the year, cash sales are RM700,000 and credit sales are RM2,500,000. Management estimates that 1% of net credit sales is uncollectibles. What adjusting entry will Valli Company make to record the bad debts expense?

Bad Debt Expense 25,000 Allowance for Doubtful Debts Accounts 25,000

Bad Debt Expense 32,000 Allowance for Doubtful Debts Accounts 32,000

Bad Debt Expense 25,000 Accounts Receivable 25,000

Bad Debt Expense 32,000 Accounts Receivable 32,000

QUIZ 2 : TOPIC 7 [ACCOUNTING FOR RECEIVABLES]

Authored by Madam Zarina

Business, Professional Development, Education

1st Grade - University

Used 60+ times

QUIZ 2 : TOPIC 7 [ACCOUNTING FOR RECEIVABLES]

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31 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

When a sale is made with the credit terms of 2/10, n/30, the "10" refers to what period?

discount

trade

special

tax

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

On June 1, RM800 of goods are sold with credit terms of 1/10, n/30. How much should the seller expect to receive if the buyer pays on June 8?

720

784

792

800

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

On June 1,RM800 of goods are sold with credit terms of 1/10, n/30. On June 3 the customer returned RM100 of the goods. How much should the seller expect to receive if the buyer pays on June 8.

692

693

700

792

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

When the Allowance for Doubtful Debts Accounts appears on a company's financial statements, its balance will be a __________ balance.

debit

credit

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

On which financial statement would you expect to find Allowance for Doubtful Debts Accounts?

Statement of Financial Position

Statement of Profit or Loss

Statement of Cash Flow

Statement of Owner's Equity

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which method of reporting losses on accounts receivable is to be used for financial reporting?

allowance

direct write-off

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

After several years of operations, a company's Bad Debts Expense for a given year is likely to be the same as its balance in Allowance for Doubtful Debts Accounts.

True

False

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QUIZ 2 : TOPIC 7 [ACCOUNTING FOR RECEIVABLES]

When a sale is made with the credit terms of 2/10, n/30, the "10" refers to what period?

On June 1, RM800 of goods are sold with credit terms of 1/10, n/30. How much should the seller expect to receive if the buyer pays on June 8?

On June 1,RM800 of goods are sold with credit terms of 1/10, n/30. On June 3 the customer returned RM100 of the goods. How much should the seller expect to receive if the buyer pays on June 8.

When the Allowance for Doubtful Debts Accounts appears on a company's financial statements, its balance will be a __________ balance.

On which financial statement would you expect to find Allowance for Doubtful Debts Accounts?

Which method of reporting losses on accounts receivable is to be used for financial reporting?

After several years of operations, a company's Bad Debts Expense for a given year is likely to be the same as its balance in Allowance for Doubtful Debts Accounts.

A company estimates that RM20,000 of its RM500,000 of account receivable will be uncollectible. Its Allowance for Doubtful Debts Accounts presently has a credit balance of RM8,000. The adjusting entry will include a _____________ to the Allowance for Doubtful Debts Accounts.

The loss from an uncollectible amount is a regular expense of doing business.

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