1. Newark Company has provided the following information: • Cash sales, $450,000
ID: 2501250 • Letter: 1
Question
1. Newark Company has provided the following information:
• Cash sales, $450,000
• Credit sales, $1,350,000
• Selling and administrative expenses, $330,000
• Sales returns and allowances, $90,000
• Gross profit, $1,360,000
• Increase in accounts receivable, $55,000
• Bad debt expense, $33,000
• Sales discounts, $43,000
• Net income, $1,030,000
How much is Newark's cost of sales?
A $307,000.
B. $252,000.
C. $440,000.
D. $340,000.
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2.Newark Company has provided the following information:
• Cash sales, $450,000
• Credit sales, $1,350,000
• Selling and administrative expenses, $330,000
• Sales returns and allowances, $90,000
• Gross profit, $1,360,000
• Increase in accounts receivable, $55,000
• Bad debt expense, $33,000
• Sales discounts, $43,000
• Net income, $1,030,000
What is the effect of collections from customers on cash flow from operating activities, using the indirect method?
A. Cash flow increased $975,000.
B. Cash flow increased $395,000.
C. Cash flow decreased $55,000.
D. Cash flow increased $450,000.
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3. Flyer Company has provided the following information prior to any year-end bad debt adjustment:
• Cash sales, $150,000
• Credit sales, $450,000
• Selling and administrative expenses, $110,000
• Sales returns and allowances, $30,000
• Gross profit, $490,000
• Accounts receivable, $110,000
• Sales discounts, $14,000
• Allowance for doubtful accounts credit balance, $1,200
Flyer prepares an aging of accounts receivable and the result shows that 5% of accounts receivable is estimated to be uncollectible. How much is bad debt expense?
A. $5,500.
B. $6,700.
C. $4,240.
D. $4,300.
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4.
Which of the following is correct when bad debt expense is recorded at year-end?
A. Current assets will increase.
B. Gross profit will decrease.
C. Income from operations will decrease.
D. Current liabilities will decrease.
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5.
Which of the following statements is false?
A. The journal entry to record bad debt expense decreases current assets.
B. The journal entry to record bad debt expense decreases retained earnings.
C. The journal entry to write-off an uncollectible account receivable decreases operating income.
D. The journal entry to write-off an uncollectible account receivable does not affect current assets.
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6. The CHS Company has provided the following information:
• Accounts receivable written-off as uncollectible during the year amounted to $11,500.
• The accounts receivable balance at the beginning of the year was $150,000.
• The accounts receivable balance at the end of the year was $210,000.
• The allowance for doubtful accounts balance at the beginning of the year was $14,000.
• The allowance for doubtful accounts balance at the end of the year after the recording of bad debt expense was $12,900.
• Credit sales during the year totaled $900,000.
How much cash was received from collections of accounts receivable?
A. $888,500.
B. $828,500.
C. $690,000.
D. $701,500.
Explanation / Answer
1) Cost of Sales = Cash sales +Credit sales -sales return and allowances -sales discount - gross profit
Cost of sales = 1350000-90000-43000 =1217000
=1217000+450000 = 1667000
total sales -gross profit = cost of sales
=1667000-1360000 = $307000
3) Accounts Receivable = 1100000
5 % is uncollectible so 5% of 1100000 = $5500
Allowance for doubtfull debts = $1200
bad debts = 5500-1200= $4300
the correct option is D
4) Income from operations will decrease.
5) C. The journal entry to write-off an uncollectible account receivable decreases operating income.
6) CAsh received form collection of Accounts Receivable = credit sales +beginnig Accounts Recievable -ending Accounts receivable -Accounts receivable write offs
=900000+150000-210000-11500 = $828500
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