Short Problems
1.At the beginning of 2010, Flagstaff Corp.’s allowance for doubtful accounts is $10,000. During 2010, $7,000 was written off as uncollectible. At December 31, the company used an aging schedule of accounts receivable and determined that $8,000 of the accounts receivable would probably be uncollectible. Calculate bad debts expense to be reported on Flagstaff’s 2010 income statement.
2.Before adjusting entries, Dormont Corp’s accounts receivable and allowance for doubtful accounts are $800,000 and $7,000 (credit balance), respectively. Using an aging schedule of accounts receivable, it is determined that $44,000 of the accounts receivable would probably be uncollectible. Calculate the net realizable value of Dormont’s receivables at year end.
3.How would the current ratio be affected if Ryan collects the accounts receivable and then uses some of the cash to pay off the accounts payable?
4.Calculate Ryan’s working capital, current ratio, and quick ratio at December 31, 2010.
5.How would the quick ratio be affected if Ryanpurchased $500 of inventory on account?
6.How would the current ratio be affected if Ryancollects $600 from customers for amounts owed?