21) The sales method for estimating bad debts is calculated using ________.
A) aging of accounts receivable
B) a percentage of credit sales
C) a percentage of net accounts receivable
D) the current balance in accounts receivable
22) Team Shirts had a balance in its allowance for uncollectible accounts of $(200). Aging the accounts receivable showed that the allowance should be $(1,800). Bad debts expense should be ________.
A) $1,400
B) $1,600
C) $1,800
D) $2,000
23) Lee’s Lions had a balance of a positive $200 in its Allowance for uncollectible accounts. Based on an aging of accounts receivable, management estimates that the Allowance for uncollectible accounts balance should be $(2,000). Bad debts expense should be ________.
A) $1,600
B) $1,800
C) $2,000
D) $2,200
24) Midway Company had a balance of $(500) in its allowance for uncollectible accounts. Aging of its accounts receivable revealed that the allowance should be $(1,400). The amount of bad debts expense for the period should be ________.
A) $500
B) $900
C) $1,400
D) $1,900
25) Team Shirts had a balance of $(700) in its Allowance for uncollectible accounts. Aging of its accounts receivable revealed that the allowance should be $(1,250). The amount of bad debts expense for the period should be ________.
A) $550
B) $700
C) $1,250
D) $1,950
26) The Allowance for uncollectible accounts ________.
A) is subtracted from Sales to calculate Net sales on the income statement
B) is always equal to Bad debts expense for the year
C) is subtracted from Accounts receivable to calculate Net realizable value of accounts receivable
D) is subtracted from Cash on the balance sheet
27) A company has an allowance for uncollectible accounts of $1,000, a positive number, at the end of the year, before the adjusting entry is made to record this year’s bad debts expense. The allowance account has a positive balance because ________.
A) the allowance always has a positive balance
B) the allowance created at the end of last year was too small to cover all of the accounts written off this year
C) the allowance created at the end of last year was larger than the total of all of the accounts written off this year
D) the balance in the allowance must always equal bad debts expense for the year.
28) Which accounting principle requires that bad debts expense be recognized in the same period as the sale?
A) entity
B) matching
C) revenue recognition
D) cost
29) XYZ Company’s accounting records on January 1 showed:
Accounts receivable $50,000
Allowance for uncollectible accounts (4,000)
On January 2, XYZ wrote off an account receivable of $1,000 from Bounder, Inc. As a result of this write-off, the net realizable value of XYZ’s accounts receivable will ________.
A) increase
B) decrease
C) remain the same
D) The answer cannot be determined from the information given.
30) The bookkeeper was unable to reconcile the company’s checking account, so she changed the company’s books to agree with the cash balance on the bank statement. This is an internal control ________.
A) strength
B) weakness
C) principle
D) suggestion