6. The bad-debt method that uses the accounts receivable aging report is _______
ID: 2426217 • Letter: 6
Question
6. The bad-debt method that uses the accounts receivable aging report is _______________.
the bad-debt expense method
the percentage-of-sales method
the direct write-off method
the percentage-of-receivables method
7. When it is determined that too much money has been set aside for uncollectible accounts, we will _______________.
credit reserve for uncollectible accounts
debit accounts receivable
credit cash
debit reserve for uncollectible accounts
8. A customer whose account was previously written off unexpectedly pays us. If we are using the allowance method we would _______________.
debit accounts receivable and credit allowance for uncollectible accounts AND debit cash and credit accounts receivable
debit cash and credit bad-debt expense
debit reserve for uncollectible accounts and credit cash
debit bad-debt expense and credit cash
9. When a retailer accepts a bank card (VISA or MasterCard), they will make what entry for the day’s receipts?
debit cash and debit “credit card expense”; credit sales
debit accounts receivable and credit sales
debit cash and credit sales
debit accounts receivable; credit sales, and credit “credit card expense”
the bad-debt expense method
the percentage-of-sales method
the direct write-off method
the percentage-of-receivables method
Explanation / Answer
6. ---The bad-debt method that uses the accounts receivable aging report is the direct write-off method.
The Direct Writte-off Method is recognised Bad Debt expenses partly relating to previous year and partly relating to current accounting year. Since in the Accounts Receivable Ageing Report the receivables are reported on the basis of period or due date, this mathod is used.
7.... When it is determined that too much money has been set aside for uncollectible accounts, we will debit reserve for uncollectible accounts.
If too much money has been set aside for uncollectible accounts, then we will debit reserve for uncollectible accounts in order to reduce the balance of uncollectible account.
8. A customer whose account was previously written off unexpectedly pays us. If we are using the allowance method we would debit accounts receivable and credit allowance for uncollectible accounts AND debit cash and credit accounts receivable.
Under Allowance Method reversal entry is to be passed if previously written off amount is received. The following two entry is to be passed on recovery of written off bad debts amount:
(i) Reversal of entry which was made to written of the account
Accounts Receivable Dr.
To Allowance for Uncollectible Account
(ii) To record cash collection on recovery of written off amount
Cash A/c Dr.
To Accounts Receivable
9. When a retailer accepts a bank card (VISA or MasterCard), they will make the below entry for the day’s receipts
debit cash and debit “credit card expense”; credit sales
Retailer is recognised following Journal Entry with respect to sales receipt from a bank card, (Assumed that cash is received immediately)..
Cash A/c Dr. (Net Receipt)
Credit Card Expenses A/c Dr. (Processing Fees)
To Sales (Sales Value)
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