1.Midas Company, which has an adequate amount in its Allowance for Doubtful Acco
ID: 2400571 • Letter: 1
Question
1.Midas Company, which has an adequate amount in its Allowance for Doubtful Accounts, writes off as uncollectible an account receivable from a bankrupt customer. This action will:
a.Reduce total current assets
b.Reduce net income
c.Increase total current assets
d.Have no effect on total current assets
e.None of the above
Use the following information for the next question:
Following is selected information for Fred Company, AFTER year-end adjusting entries:
For year ended December 31:
2004
2003
Sales
$5,000,000
$4,500,000
Bad Debts Expense
120,000
110,000
As of December 31:
Accounts Receivable (gross)
$350,000
$300,000
Allowance for Bad Debts
10,000
20,000
2.On the basis of the information provided for Fred Company, the Accounts Receivable written off in 2004 were:
Use the following information for the next 4 questions:
Royal Corp. had Accounts Receivable of $700,000 and an Allowance for Doubtful Accounts of $50,000 just before writing off an account receivable from Filo Company of $10,000.
3.The net realizable value of the accounts receivable beforethe write-off were:
4.Gross Accounts Receivable afterthe write-off are:
5.The balance in the Allowance for Doubtful Accountsafterthe write-off is:
6.The net realizable value of the accounts receivable afterthe write-off are:
Use the following information for the next question:
Following is selected information for Fred Company, AFTER year-end adjusting entries:
For year ended December 31:
2004
2003
Sales
$5,000,000
$4,500,000
Bad Debts Expense
120,000
110,000
As of December 31:
Accounts Receivable (gross)
$350,000
$300,000
Allowance for Bad Debts
10,000
20,000
2.On the basis of the information provided for Fred Company, the Accounts Receivable written off in 2004 were:
Explanation / Answer
Q1. Answer is d. Have no effect on total current assets. Q2. Answer is Amount written off in 2004 is $ 130000 Explanation: Beginning Balance in Allowance: 20000 Add: bad debt expense 120000 Less: ending balance 10000 Amount written off 130000 Q3. Net realizable amount: Accounts receivable-Gross 700000 Less: Allowance 50000 Net realizable amount: 650000 Q4. Gross Accounts receivable after write off: Accounts receivable 700000 Less: Amount write off 10000 Accounts receivable-Gross 690000 Q5. balance in Allowance: Allowance balance before write off 50000 Less: Amount write off 10000 Allowance after write off 40000 Q6. Net realizable Amount: Accounts receivable-Gross 690000 Less: Allowance 40000 Net realizable amount: 650000
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