1. Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $300,000 and credit sales are $1,000,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?
Answer
| a. | Bad Debt Expense 20,000 Allowance for Doubtful Accounts 20,000 | |
| b. | Bad Debt Expense 17,000 Allowance for Doubtful Accounts 17,000 | |
| c. | Bad Debt Expense 15,000 Allowance for Doubtful Accounts 15,000 | |
| d. | Bad Debt Expense 13,000 Allowance for Doubtful Accounts 13,000 |
2. Following the completion of the bank reconciliation, an adjusting entry was made that debited cash and credited Interest Revenue. Therefore the bank reconciliation must have included an item that was Answer
| a. | deducted from the balance per bank statement | |
| b. | deducted from the balance per company’s records | |
| c. | added to the balance per company’s records | |
| d. | added to the balance per bank statement |
3. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer’s account as uncollectible?
Answer
| a. | Accounts Receivable | |
| b. | Allowance for Doubtful Accounts | |
| c. | Uncollectible Accounts Expense | |
| d. | Interest Expense |
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