Ch7. Video 5 - Allowance Method example

The video tutorial covers the process of recording journal entries for a multi-year problem involving Juliet Company. It explains the initial transactions, adjustments for bad debt, and the allowance method. The tutorial also discusses the process of writing off uncollectible accounts and reversing write-offs when payments are unexpectedly received. The video emphasizes the importance of accurately reflecting accounts receivable and net realizable value on the balance sheet.

What is the correct journal entry for consulting services provided on account?

• Debit Cash, Credit Accounts Payable

• Debit Service Revenue, Credit Accounts Receivable

• Debit Cash, Credit Service Revenue

• Debit Accounts Receivable, Credit Service Revenue

When Juliet Company collects cash from accounts receivable, what is the correct journal entry?

• Debit Cash, Credit Accounts Receivable

• Debit Cash, Credit Service Revenue

• Debit Accounts Receivable, Credit Cash

• Debit Service Revenue, Credit Cash

How does Juliet Company estimate uncollectible accounts?

• By writing off the entire accounts receivable

• By creating a contra account called Allowance for Doubtful Accounts

• By increasing the cash balance

• By reducing service revenue

What happens when an account is written off as uncollectible?

• The account is transferred to cash

• The account is credited to service revenue

• The account is removed from accounts receivable and allowance for doubtful accounts

• The account is added back to accounts receivable

What is the purpose of the Allowance for Doubtful Accounts?

• To estimate the amount of accounts receivable that may not be collected

• To decrease the accounts payable

• To increase the cash balance

• To record additional service revenue

What is the impact on the financial statements when a previously written-off account is collected?

• The net realizable value of accounts receivable remains unchanged

• The allowance for doubtful accounts increases

• The service revenue increases

• The accounts receivable balance decreases

How is the net realizable value of accounts receivable calculated?

• By dividing accounts receivable by the allowance for doubtful accounts

• By multiplying accounts receivable by the allowance for doubtful accounts

• By subtracting the allowance for doubtful accounts from accounts receivable

• By adding the allowance for doubtful accounts to accounts receivable