Business Accounting Quiz

Recording bad debt expense: What is the first journal entry to record bad debt expense?

Using Allowance Method

• Debit Cash, Credit Accounts Receivable

• Debit Bad Debt Expense, Credit Sales Revenue

• Debit Bad Debt Expense, Credit Allowance for Doubtful Accounts

• Debit Allowance for Doubtful Accounts, Credit Accounts Payable

Recording bad debt expense: If a company estimates that 2% of credit sales will be uncollectible, and credit sales for the period are $200,000, what is the bad debt expense for the period?

• $4,000

• $2,000

• $10,000

• $1,000

Recording bad debt expense: A company has an aging of accounts receivable that indicates an estimated bad debt expense of $5,000. What is the journal entry to record the bad debt expense?

Using Allowance Method

• Debit Bad Debt Expense for $5,000 and credit Allowance for Doubtful Accounts for $5,000

• Debit Bad Debt Expense for $2,000 and credit Allowance for Doubtful Accounts for $3,000

• Debit Bad Debt Expense for $5,000 and credit Cash for $5,000

• Debit Bad Debt Expense for $5,000 and credit Accounts Payable for $5,000

Estimating allowance for doubtful accounts: What is the purpose of the allowance for doubtful accounts?

• To increase the company's profits

• To estimate and account for potential losses from customers who may not pay their outstanding balances.

• To provide discounts to customers

• To decrease the company's cash flow

Estimating allowance for doubtful accounts: If a company has accounts receivable of $50,000 and estimates that 5% will be uncollectible, what is the required balance for the allowance for doubtful accounts?

• $25,000

• $10,000

• $500

• $2,500

Estimating allowance for doubtful accounts: A company's aging of accounts receivable indicates an estimated uncollectible amount of $8,000. What adjusting entry should be made to the allowance for doubtful accounts?

• Credit the accounts receivable for $8,000.

• Do not make any adjusting entry.

• Debit the allowance for doubtful accounts for $8,000.

• Credit the allowance for doubtful accounts for $8,000.

Accounting for sales discounts: What is the purpose of accounting for sales discounts?

• To decrease the accuracy of revenue recording

• To accurately record revenue and cost of goods sold, and to analyze the effectiveness of discount strategies.

• To increase the cost of goods sold

• To make discount strategies less effective

Accounting for sales discounts: If a customer is offered a 2% discount for paying within 10 days, what is the net amount due on a $1,000 invoice if the customer pays within the discount period?

• $1,000

• $950

• $1,020

• $980

Accounting for sales discounts: A company offers a 5% discount for early payment. If a customer pays a $500 invoice within the discount period, what amount will the company receive?

• $495

• $520

• $475

• $450

Adjusting allowance for doubtful accounts: What is the purpose of adjusting the allowance for doubtful accounts?

• To increase the company's profits

• To decrease the company's liabilities

• To accurately predict future sales

• To reflect the estimated amount of uncollectible accounts in the financial statements