105. Using the allowance method, writing off an actual bad debt would include a:
a. Debit to Bad Debt Expense.
b. Credit to Accounts Receivable.
c. Debit to Accounts Receivable.
d. Credit to Allowance for Uncollectible Accounts.
106. On December 31, 2015, Coolwear Inc. had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $48,400 and $940, respectively. During 2016, Coolwear wrote off $820 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,140 at December 31, 2016. Bad debt expense for 2016 would be:
a. $320.
b. $1,140.
c. $820.
d. $1,020.
107. On December 31, 2015, Larry's Used Cars had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $53,600 and $1,325, respectively. During 2016, Larry's wrote off $1,465 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,280 at December 31, 2016. Bad debt expense for 2016 would be:
a. $1,280.
b. $1,465.
c. $1,420.
d. $1,140.
108. At the beginning of 2015, the balance in Jackson Enterprises’ Allowance for Uncollectible Accounts was $31,800. During 2015, the company wrote off $38,000 of accounts receivable. Writing off the individual bad debts would include a:
a. Debit to Bad Debt Expense.
b. Credit to Accounts Receivable.
c. Credit to the Allowance for Uncollectible Accounts.
d. Both a and c.
109. A company collects an account receivable previously written off. Indicate how this transaction would affect the following five financial statement items:
Stockholders’
AssetsLiabilities EquityRevenuesExpenses
a.IncreaseDecrease Increase Decrease No effect
b.IncreaseNo effect Increase Increase Decrease
c.Increase No effect Increase Increase No effect
d.No effectNo effect No effect No effect No effect
110. The current year’s beginning and ending balances for Allowance for Uncollectible Accounts is $23,000 and $27,000, respectively. If the amount of Bad Debt Expense for the year is $18,000, what is the amount of actual bad debts for the year?
a. $14,000.
b. $10,000.
c. $18,000.
d. $22,000.
111. The direct write-off method is generally not permitted for financial reporting purposes because:
a. Compared to the allowance method, it would allow greater flexibility to managers in manipulating reported net income.
b. This method is primarily used for tax purposes.
c. It is too difficult to accurately estimate future bad debts.
d. Expenses (bad debts) are not properly matched with the revenues (credit sales) that they help to generate.
112. Under the direct write-off method, what adjustment is made at the end of the year to account for possible future bad debts?
a. Debit Bad Debt Expense.
b. Debit Allowance for Uncollectible Accounts.
c. Credit Accounts Receivable.
d. No adjustment is made.
113. Under the direct write-off method, what adjustment is made at the time an actual bad debt occurs?
a. Debit Bad Debt Expense, credit Allowance for Uncollectible Accounts.
b. Debit Allowance for Uncollectible Accounts, credit Accounts Receivable.
c. Debit Bad Debt Expense, credit Accounts Receivable.
d. No adjustment is made.
114. Which accounting principle does the direct write-off method violate?
a. Cost.
b. Realization.
c. Revenue recognition.
d. Matching.