Practice Midterm Quiz 11a Flashcards
- Julian Company sold goods for a total selling price of $5,000. The sale was made on account. The terms of the sale are 4/10, n/30. – Assume that Julian collects the cash 15 days after the sale. What amount will be reported as “net sales” from this transaction?
a. $5,000
b. $4,900
c. $4,800
d. $5,100
e. $5,200
22.
Solution = A
The sales terms 4/10, n/30 mean that the customer gets a 4% discount for paying within 10 days. In this case, the customer paid in 15 days, so there is no discount.
During Year 1, Kylie Department Store had total sales of $3,000,000, of which 60% were on credit. During the year, $1,000,000 cash was collected on credit sales. The beginning balance in Accounts Receivable (on January 1 of Year 1) was $165,000. The beginning balance in the Allowance for Bad Debts (on January 1 of Year 1) was $20,000. The amount of accounts written off as uncollectible during the year was $27,000.
- Management uses the percentage of sales method and estimates that 4% of credit sales will ultimately be uncollectible. Which ONE of the following is included in the journal entry necessary at the end of the year to record bad debt expense for the year?
a. DEBIT to Bad Debt Expense for $72,000
b. DEBIT to Allowance for Bad Debts for $72,000
c. DEBIT to Accounts Receivable for $72,000
d. CREDIT to Bad Debt Expense for $72,000
e. CREDIT to Cash for $72,000
f. CREDIT to Accounts Receivable for $72,000
23.
Solution = A
($3,000,000 × 0.60) = $1,800,000 credit sales
$1,800,000 × 0.04 = $72,000 bad debt expense
Bad Debt Expense 72,000 Allowance for Bad Debts 72,000
During Year 1, Kylie Department Store had total sales of $3,000,000, of which 60% were on credit. During the year, $1,000,000 cash was collected on credit sales. The beginning balance in Accounts Receivable (on January 1 of Year 1) was $165,000. The beginning balance in the Allowance for Bad Debts (on January 1 of Year 1) was $20,000. The amount of accounts written off as uncollectible during the year was $27,000.
- Refer to the data before Question 23. – Management uses the percentage of sales method and estimates that 4% of credit sales will ultimately be uncollectible. Which ONE of the following is included in the summary journal entry necessary during the year to record the write off of the $27,000 in verified uncollectible accounts?
a. DEBIT to Bad Debt Expense for $27,000
b. DEBIT to Allowance for Bad Debts for $27,000
c. DEBIT to Accounts Receivable for $27,000
d. CREDIT to Bad Debt Expense for $27,000
e. CREDIT to Cash for $27,000
f. DEBIT to Cash for $27,000
24.
Solution = B
Allowance for Bad Debts 27,000 Accounts Receivable 27,000
During Year 1, Kylie Department Store had total sales of $3,000,000, of which 60% were on credit. During the year, $1,000,000 cash was collected on credit sales. The beginning balance in Accounts Receivable (on January 1 of Year 1) was $165,000. The beginning balance in the Allowance for Bad Debts (on January 1 of Year 1) was $20,000. The amount of accounts written off as uncollectible during the year was $27,000.
- Refer to the data before Question 23. – Management does NOT use the percentage of sales method, so ignore the data in Question 23 and Question 24; just refer back to the original data found before Question 23. – Management has performed an aging analysis on its Accounts Receivable. The end result of this aging analysis is that the balance in the Allowance for Bad Debts as of the end of Year 1 should be $50,000. Which ONE of the following is included in the journal entry necessary at the end of the year to record bad debt expense for the year?
a. DEBIT to Bad Debt Expense for $50,000
b. DEBIT to Allowance for Bad Debts for $50,000
c. DEBIT to Accounts Receivable for $50,000
d. DEBIT to Bad Debt Expense for $57,000
e. DEBIT to Allowance for Bad Debts for $57,000
f. DEBIT to Accounts Receivable for $57,000
25.
Solution = D
Allowance for Bad Debts (in thousands)
20 Beginning Balance Writeoffs 27 ?? Bad Debt Expense
50 Ending Balance
Necessary amount of bad debt expense = $57,000
Bad Debt Expense 57,000 Allowance for Bad Debts 57,000
During Year 1, Kylie Department Store had total sales of $3,000,000, of which 60% were on credit. During the year, $1,000,000 cash was collected on credit sales. The beginning balance in Accounts Receivable (on January 1 of Year 1) was $165,000. The beginning balance in the Allowance for Bad Debts (on January 1 of Year 1) was $20,000. The amount of accounts written off as uncollectible during the year was $27,000.
- Refer to the data before Question 23. – Management does NOT use the percentage of sales method, so ignore the data in Question 23 and Question 24; just refer back to the original data found before Question 23. – Management has performed an aging analysis on its Accounts Receivable. The end result of this aging analysis is that the balance in the Allowance for Bad Debts as of the end of Year 1 should be $50,000. – What is Kylie’s NET Accounts Receivable balance as of the end of the year, after recording the Allowance for Bad Debts?
a. $800,000
b. $965,000
c. $881,000
d. $908,000
e. $888,000
26.
Solution = E
Accounts Receivable (in thousands) | Begin. balance 165 |1,000 Cash collections New credit sales 1,800 | 27 writeoffs End. balance 938 |
Allowance for Bad Debts (in thousands) 20 Beginning balance writeoffs 27 | 57 Bad Debt Expense | 50 Ending balance
NET Accounts Receivable = $938 - $50 = $888 (in thousands), or $888,000
During Year 1, Ramona Department Store had total sales of $3,000,000, of which 80% were on credit. The beginning balance in Accounts Receivable (on January 1 of Year 1) was $165,000. The beginning balance in the Allowance for Bad Debts (on January 1 of Year 1) was $20,000. The amount of accounts written off as uncollectible during the year was $27,000.
The following aging of Accounts Receivable is for Ramona Company at the end of Year 1.
Aging of Accounts Receivable
December 31 of Year 1
Less than 31 days to 61 days to Over Overall 30 days 60 days 90 days 90 days Total $492,000 $366,000 $72,000 $24,000 $30,000
Ramona Company has developed the following bad debt information from its own past experience. Percent Ultimately Age of Account Uncollectible Less than 30 days 2 31 to 60 days 12 61 to 90 days 35 Over 90 days 90
- How much CASH was collected from CREDIT CUSTOMERS during the year?
a. $2,073,000
b. $2,721,000
c. $2,400,000
d. $2,370,000
e. $2,424,000
f. $2,046,000
27.
Solution = F
Accounts Receivable (in thousands) | Begin. balance 165 | ??? Cash collections New credit sales 2,400 | 27 writeoffs End. balance 492 |
Implied amount of cash collections = $2,046,000
During Year 1, Ramona Department Store had total sales of $3,000,000, of which 80% were on credit. The beginning balance in Accounts Receivable (on January 1 of Year 1) was $165,000. The beginning balance in the Allowance for Bad Debts (on January 1 of Year 1) was $20,000. The amount of accounts written off as uncollectible during the year was $27,000.
The following aging of Accounts Receivable is for Ramona Company at the end of Year 1.
Aging of Accounts Receivable
December 31 of Year 1
Less than 31 days to 61 days to Over Overall 30 days 60 days 90 days 90 days Total $492,000 $366,000 $72,000 $24,000 $30,000
Ramona Company has developed the following bad debt information from its own past experience. Percent Ultimately Age of Account Uncollectible Less than 30 days 2 31 to 60 days 12 61 to 90 days 35 Over 90 days 90
- Refer to the data before Question 27. – Ramona Company uses the aging method to determine its ending Allowance for Bad Debts balance. What is the appropriate Allowance for Bad Debts balance as of the end of Year 1?
a. $27,000
b. $57,000
c. $50,000
d. $45,960
e. $51,360
f. $54,000
28.
Solution = E
Category Amount Percentage Total Less than 30 days $366,000 0.02 $ 7,320 31 to 60 days 72,000 0.12 8,640 61 to 90 days 24,000 0.35 8,400 Over 90 days 30,000 0.90 27,000
Ending Allowance for Bad Debts $51,360
During Year 1, Ramona Department Store had total sales of $3,000,000, of which 80% were on credit. The beginning balance in Accounts Receivable (on January 1 of Year 1) was $165,000. The beginning balance in the Allowance for Bad Debts (on January 1 of Year 1) was $20,000. The amount of accounts written off as uncollectible during the year was $27,000.
The following aging of Accounts Receivable is for Ramona Company at the end of Year 1.
Aging of Accounts Receivable
December 31 of Year 1
Less than 31 days to 61 days to Over Overall 30 days 60 days 90 days 90 days Total $492,000 $366,000 $72,000 $24,000 $30,000
Ramona Company has developed the following bad debt information from its own past experience. Percent Ultimately Age of Account Uncollectible Less than 30 days 2 31 to 60 days 12 61 to 90 days 35 Over 90 days 90
- Refer to the data before Question 27. – Ramona Company uses the aging method to determine its ending Allowance for Bad Debts balance. Which ONE of the following is included in the journal entry necessary at the end of the year to record bad debt expense for the year?
a. DEBIT to Bad Debt Expense for $51,360
b. DEBIT to Allowance for Bad Debts for $51,360
c. DEBIT to Accounts Receivable for $51,360
d. CREDIT to Bad Debt Expense for $58,360
e. CREDIT to Allowance for Bad Debts for $58,360
f. CREDIT to Accounts Receivable for $58,360
29.
Solution = E
Allowance for Bad Debts 20,000 Beginning balance writeoffs 27,000 | ?? Bad Debt Expense | 51,360 Ending balance
For the ending balance calculation of $51,360, see the solution to Question 7.
Necessary amount of bad debt expense = $58,360
Bad Debt Expense 58,360 Allowance for Bad Debts 58,360
During Year 1, Ramona Department Store had total sales of $3,000,000, of which 80% were on credit. The beginning balance in Accounts Receivable (on January 1 of Year 1) was $165,000. The beginning balance in the Allowance for Bad Debts (on January 1 of Year 1) was $20,000. The amount of accounts written off as uncollectible during the year was $27,000.
The following aging of Accounts Receivable is for Ramona Company at the end of Year 1.
Aging of Accounts Receivable
December 31 of Year 1
Less than 31 days to 61 days to Over Overall 30 days 60 days 90 days 90 days Total $492,000 $366,000 $72,000 $24,000 $30,000
Ramona Company has developed the following bad debt information from its own past experience. Percent Ultimately Age of Account Uncollectible Less than 30 days 2 31 to 60 days 12 61 to 90 days 35 Over 90 days 90
- Refer to the data before Question 27. – Ramona Company uses the aging method to determine its ending Allowance for Bad Debts balance. – What is Ramona’s NET Accounts Receivable balance as of the end of the year, after recording the Allowance for Bad Debts?
a. $465,000
b. $440,640
c. $433,640
d. $543,360
e. $550,360
f. $523,360
30.
Solution = B
$492,000 - $51,360 = $440,640
