126.Franks Company has a debit balance of $3,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on review and aging of its accounts receivable at the end of the year, Franks estimates that $60,000 of its receivables are uncollectible. The amount of bad debts expense which should be reported for the year is:
a.$3,000
b.$57,000
c.$60,000
d.$63,000
127.Which of the following is one of the methods used to account for uncollectible accounts?
a.Percentage of sales (emphasis on income statement).
b.Percentage of receivables (emphasis on statement of financial position).
c.Direct write-off.
d.All of these answer choices are correct.
128.Which of the following is
false
regarding the Allowance for Doubtful Accounts?
a.The Allowances for Doubtful Accounts is closed at the end of the fiscal year.
b.Cash realizable value reduces receivables in the statement of financial position by the amount of estimated uncollectible receivables.
c.Cash realizable value is also referred to as "amortized cost" by the International Accounting Standards Board.
d.Cash realizable value is also referred to as "cash (net) realizable value.”
129.Which of the following relationships best describes the percentage of receivables basis of valuing accounts receivable?
a.Matching, emphasis on income statement relationships.
b.Cash realizable value emphasis on income statement relationships.
c.Matching, emphasis on statement of financial position relationships.
d.Cash realizable value, emphasis on statement of financial position relationships.
130.Which of the following transactions affects only statement of financial position accounts?
a.Recovery of a bad debt using the allowance method.
b.Recording bad debt expense using the allowance method.
c.Writing off a bad debt using the direct write-off method.
d.Recording bad debt expense using the percentage of sales basis.
131.Which of the following statements is
false
regarding the different bases used for the allowance method?
a.Three bases are generally accepted, the percentage of sales, the percentage of receivables, and the direct write-off.
b.Management can choose whichever basis it prefers.
c.If management wishes to emphasize the cash realizable value of receivables it will select the percentage of receivables basis.
d.The company must determine its past experience with bad debt losses regardless of which basis it selects.
132.The_______________ produces the better estimate of cash realizable value and reflects a statement of financial position viewpoint.
a.Direct write-off method.
b.Factoring of accounts receivable.
c.Percentage of receivable basis.
d.Expense recognition principle.
133.Gowns, Inc. uses the percentage of receivables basis to estimate its bad debts. At December 31, 2014, Gowns estimates total bad debts that will become uncollectible in the future as €4,956. The existing balance in the Allowance for Doubtful Accounts is a credit balance of €1,056. The Accounts Receivable balance at December 31, 2014 is €79,200. The amount of the bad debt adjusting entry at December 31, 2014 will impact the statement of financial position accounts by
a.Increase expenses by €4,956.
b.Increasing the Allowance for Doubtful Accounts by €4,956.
c.Increasing Accounts Receivable by €3,900.
d.Increasing the Allowance for Doubtful Accounts by €3,900.
134.Gowns, Inc. uses the percentage of receivables basis to estimate its bad debts. At December 31, 2014, Gowns estimates total bad debts that will become uncollectible in the future as €5,570. The existing balance in the Allowance for Doubtful Accounts is a credit balance of €1,320. The Accounts Receivable balance at December 31, 2014 is €99,000. The cash realizable value of Accounts Receivable reported on the statement of financial position at December 31, 2014 is
a.€97,680.
b.€104,570.
c.€93,430.
d.€94,750.
135.Gowns, Inc. uses the percentage of receivables basis to estimate its bad debts. At December 31, 2014, Gowns estimates total bad debts that will become uncollectible in the future as €5,570. The existing balance in the Allowance for Doubtful Accounts is a debit balance of €1,320. The Accounts Receivable balance at December 31, 2014 is €99,000. The amount of the bad debts adjusting entry at December 31, 2014 will impact the statement of financial position by
a.Increasing expenses by €5,570.
b.Increasing the Allowance for Doubtful Accounts by €6,890.
c.Increasing the Allowance for Doubtful Accounts by €5,570.
d.Increasing the Allowance for Doubtful Accounts by €4,250.