of $2,000 An aging of the accounts ecivable indicated the amount probably unooll
ID: 2514322 • Letter: O
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of $2,000 An aging of the accounts ecivable indicated the amount probably unoollectible to be $10,000 Unde a year-end adjusting entry for estimated bad debts would include a ebes Expense of $12,000 had occurred, the Allowance for Douberid Accounts of Mubers 39 At December 31, eove adjusting and closing the accousts eno a Debit to Bad D b Debit to the Allowance Sor Doubtul Accounts for $2,000 e Credit to the Allewance for Doubtful Accounts for $8,000 d Debit to Bad Debes Expanse of $10,000 Detbl e. None of the ahove beginning inventory was $25,000. The cost of goods sold must have boce 0 Kirtan Compary uses a periodic investory ayatem The beginning inventory was $20,000, purchases amounted to $110,000, sales totaled 5215,00, and the yer-end inventory was 5100000 b $105,000 $110,000 Some other amount d. roconds by a debit to An NSF check retuned by the bank ashould be entered in the depositor's accounting b. Accounts Reoeivable s. An expense account d Cash e. None of the above 42 In preparing a bank reconoiliation, a debit memo for a safe deposit box rental shown on the bank statement should be a. Dedacted frem the balance per the depositor's reoords b. Added to the balance per the bank statement e. Deducted from the balance per the bank statement d. Added lo the balance per the depesitor's recceds c. None ef the above 43. Enclosed with the bank statement rooeived by Matthew Company at August 31 was an NSF check for $2,012 No entry has yet been made by the company to reflect the bank's action in charging hack the NSF check During preparation of the bank reconciliation, the NSF check should be a. Added to the balance per the depositor's records b. Deducted from the balance per the depositor's reconds e. Deductod from the balance per the bank statement d. Added to the balance per the hank stalement e None of the abowe 44. The accounting records of Fran Company showed cash of $64,400 at June 30. The only reconciling items were deposits in transit of $12.000 not yet received by the bank, a credit memo for a note receivable collected by the bank for Fran in the amount of 1,000, outstanding checks camed on the account of S6, an NSF check for $400 returned by the bank which Fran had not yet charged back to the customer, and a bank service charge of S30. The preparation of a bank reconciliation shoould indicate cash owned by Fran at June 30 in the amount of $57,576 b $64,976 c. $58,776 d. $45,576 e. None of the abowe 45. While preparing a bank reconciliation, an accountant discovered hat a $302 check returned with the bank statement had been recorded erroneously in the depositor's accounting reoords as $223. lo preparing the bank reconciliation the appropriate action to correct this etror would be to: a Deduct $79 from the balance per the depositor's records b. Add $79 to the balance per the depositor's records e Add $79 to the balance per the bank statement d. Deduct $79 from the balance per the bank stalement e. None of the above 46. A conceptual short oming in te direct write off method ofaccounting for bad debts is that this method does not result in: a Matching of revenues and expenses in the same period b. Disclosure of the estimatod amount expected to be collected from total receivables on the balance sheet c. Both of the above d. None of the aboveExplanation / Answer
39. Answer is C. Credit to Allowance for doubtful accounts $ 8,000. As Allowance for doubtful accounts normally have credit balance and is shown as reduced from Accounts Receivable, the probable uncollectible amount has to be provisioned as doubtful debt and should be credit to Allowance for doubtful accounts. Hence, the impact will be $8,000 ($10,000 - $2,000). However, at the same time $10,000 has to be expensed as Provision for doubtful debts but not as bad debts as it is still a probability and not certain that the amount will not be recovered. When this will become certain as bad debt, then Allowance for Doubtful Accounts will be debited and Customer Account will be credited. A bad debt is booked agianst which there is no provision and it suddenly becomes evident that customer will not pay.
40. Answer is b. $105,000. Purchases = Cost of Goods Sold +/- Change in Inventory. Hence, we can say Cost of Goods sold = Purchases +/- Change in Inventory.
Purchases is $110,000. Change in Inventory = Opening Stock - Closing Stock = $20,000 - $25,000 = -$5,000.
Hence Cost of Goods Sold = $110,000 - $5,000 = $105,000.
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