WorksheetsBAD DEBTS AND DOUBTFUL DEBTS
Total questions: 26
Worksheet time: 30mins
In the trial balance, the balance in the allowance for doubtful debts account is
not shown as it is part of account receivable
shown as a debit item
shown as credit item
generally not shown as it is part of the current assets
The allowance for doubtful debts is created
when entities with accounts receivable terminate their business
to provide for the possibility of bad debt
to write off bad debt
to provide for a reduction in gross profit
Mine Ent had a balance on its allowance for doubtful debts of RM26,250 as at 31 December 20X2. Allowance for doubtful debts was estimated at 5% on account receivable. On 31 December 20X3, the balance of its net accounts receivable was RM 550,000. Calculate the amount of doubtful debts to be shown in the SoPL for the year ending 31 December 20X3
RM12,500
RM11,250
RM1,250
RM1,125
As at 31 December 20X3, the balance of the allowance for doubtful debts was RM15,000. If the estimated allowance for doubtful debts is 4% on accounts receivable of RM400,000, what is the adjustment needed for the allowance for doubtful debts?
RM5,000
RM1,000
RM7,000
RM3,000
Which of the following statements is true regarding the treatment of allowance for doubtful debts?
It increases the net income
It is recorded as an expense in the income statement
It is a liability on the balance sheet
It is not considered in the calculation of net profit
When a specific account is deemed uncollectible, the entry to write off the account involves
debiting allowance for doubtful debts and crediting bad debt expense
debiting the allowance for doubtful debts and crediting accounts receivable
debiting accounts receivable and crediting cash
debiting bad debt expense and crediting allowance for doubtful debts
Accounts Receivable is a current asset. Under which classification is Allowance for Doubtful Debts?
A contra account to Accounts Receivable
Operational Expenses
Other Expenses
A contra account to Sales
What effect does bad debts have on debtors?
it increases debtors
it decreases debtors
it has no effect on debtors
none of the above
State one causes of bad debts :
(a)
Allowance method is a method of accounting for bad debts that involves making provision or estimation of the uncollectible debts at the end of the accounting period.
True
False
% of provision X ending balance of Accounts Receivable = ?
beginning balance of Bad Debt Expense
beginning balance of Allowance for Doubtful Debts
Bad Debt Expense
ending balance of Allowance for Doubtful Debts
When an account becomes uncollectible and must be written off using allowance method, journal entry will be:
May choose more than 1 answer
debit Bad Debt Expense
credit Allowance for Doubtful debts
debit Accounts Receivables
credit Accounts Receivable
debit Allowance for doubtful debts
Skyline LLC uses the Allowance Method and has an Allowance for Doubtful Accounts balance of RM5,000. A specific customer account worth RM700 is deemed uncollectible. What journal entry should Skyline make to write off this account?
Debit Bad Debt Expense RM700; Credit Accounts Receivable RM700
Debit Accounts Receivable RM700; Credit Allowance for Doubtful Accounts RM700
Debit Allowance for Doubtful Accounts RM700; Credit Accounts Receivable RM700
Debit Bad Debt Expense RM700; Credit Allowance for Doubtful Accounts RM700
Mountain Retailers wrote off a RM400 account as uncollectible. Two months later, the customer unexpectedly pays the full RM400. Which of the following is the correct journal entry to record the reestablishment of this debt? (using Allowance method)
Debit Accounts Receivable RM400; Credit Cash RM400
Debit Allowance for doubtful Accounts RM400; Credit Accounts Receivable RM400
Debit Accounts Receivable RM400; Credit Allowance for Doubtful Accounts RM400
Debit Cash RM400; Credit Bad Debt Recoverable RM400
Luna Enterprises wrote off a customer's RM500 account last month. This month, the customer unexpectedly pays RM500. What journal entry should Luna record for the payment?
Debit Accounts Receivable RM500; Credit Cash RM500
Debit Cash RM500; Credit Accounts Payable RM500
Debit Allowance for Doubtful Accounts RM500; Credit Accounts Receivable RM500
Debit Cash RM500; Credit bad Debt Recoverable RM500
Mango Corp. sold merchandise worth $1,200 on credit. After 9 months, Mango determines the customer will not be able to pay and writes off the receivable. What is the journal entry? (using Allowance method)
Debit Bad Debt Expense $1,200; Credit Accounts Receivable $1,200
Debit Accounts Receivable $1,200; Credit Bad Debt Expense $1,200
Debit Allowance for Doubtful Accounts $1,200; Credit Accounts Receivable $1,200
Debit Bad Debt Expense $1,200; Credit Allowance for Doubtful Accounts $1,200
The accounts receivable that cannot be collected because of their bankruptcy or another reason are termed as:
collectible accounts
bad customers
doubtful accounts
uncollectible accounts
On which financial statement would you expect to find Allowance for Doubtful Accounts?
Statement of Financial Position
Statement of Comprehensive Income
Statement of Owners Equity
Statement of Cash Flow
Two methods of accounting for uncollectible accounts are the
allowance method and the accrual method.
direct write-off method and the accrual method.
direct write-off method and the allowance method.
allowance method and the net realizable method.
When an account becomes uncollectible and must be written off,
Bad Debt Expense should be credited.
Allowance for Doubtful Accounts should be credited.
Sales Revenue should be debited.
Accounts Receivable should be credited.
Under the allowance method, the journal entry to write off an uncollectible account is _______.
Debit. Allowance for Doubtful Accounts
Credit. Accounts Receivable
Debit. Accounts receivable
Credit. Allowance for Doubtful Accounts
Debit. Bad Debts Expense
Credit. Accounts Receivable
Debit. Accounts Receivable
Credit. Bad Debts Expense
A company estimates that RM20,000 of its RM500,000 of account receivable will be uncollectible. Its Allowance for Doubtful Accounts presently has a credit balance of RM8,000. The adjusting entry will include a _____________ to the Allowance for Doubtful Accounts.
debit of RM12,000
credit of RM12,000
debit of RM28,000
credit of RM28,000
The business provides for doubtful debts each year at 2% of the accounts receivable balance at the end of the financial year. The balance of the Accounts Receivable Control account is RM45,000. What is the amount of Allowance for Doubtful Debts?
RM900
RM9000
RM450
RM90
Accounts Receivables :
2019 : RM2800;
2020 : RM3100
Allowance for doubtful debts :
2019 : RM280
2020: RM310
What is Net Realizable value for Accounts Receivables should appear in the Statement of Financial Position for 2020?
RM2520
RM2790
RM2510
RM3410
1 Jan 2020: Allowance for doubtful debts RM230
31 Dec 2020: Allowance for doubtful debts RM462
What is the amount of new allowance for doubtful debts should be treated in the Statement Of Financial Position?
RM 230
RM 232
RM 462
RM 692
1 Sept 2020: Allowance for doubtful debts RM500
31 Aug 2021: Allowance for doubtful debts RM400
How should the decrease in the allowance be treated in the Profit and Loss account?
add RM400 to expenses
add RM500 to expenses
deduct the RM100 increase in allowance from expenses
add the RM100 decrease in allowance to Profit
