Some accounting questions I have on Receivables : 1. Bernie\'s Ltd. sells goods

Question

Some accounting questions I have on Receivables:

1.

Bernie's Ltd. sells goods on terms 2/10, n/30. Gross credits sales for May were $40,000 and for June were $60,000. Analysis of Bernie's Ltd. shows that customer payments on account have the following trends:

The percentages in the table are of total monthly credit sales. How much cash was collected on customer accounts in June?

$51,280

$34,300

None of the other alternatives are correct

$9,880

$41,400

2.

Choose the term that best matches the following description: Bases bad debt expense on an estimate of uncollectible accounts.

Percentage of Credit Sales Method

None of the other alternatives are correct

Sales Returns and Allowances

Bad debt Expense

Allowance Method

3.

A contra account:

Sits opposite to another related account on the opposite side of the balance sheet

None of the above

Is an offset to its related parent account

Is only found in the income statement in the Cost of Goods Sold section

Is used in the cash basis of accounting but not in accrual accounting

4.

A firm has accounts receivable of $60,000 and a debit balance of $600 in the Allowance for Uncollectible Accounts. Two thirds of the accounts receivable are current and one-third are past due. The firm estimates that 2% of the current accounts and 5% of the past due accounts will prove to be uncollectible. The adjusting entry to provide for uncollectible accounts expense should be for:

$1,800

$1,200

$2,800

$2,400

None of the other alternatives are correct

Receiving discount Beyond discount period Total In month of sale 50% 20% 70% In month following sale 15% 10% 25% Uncollectible accounts, returns, allowances 5% 100%

Explanation / Answer

1 May 40000 Collection Schedule: For the June Month Sales Sales Receiving Discount Beyond Discount Total 60000 50% 20% 29400 12000 41400 *` (60000*50%*98%) (60000*20% For the May Month Sales 40000 15% 10% 5880 4000 9880 (40000*15%*98%) (40000*10%) Total Collections in June 51280 2 The Allowance Method bases bad debt expense on an estimate of Uncollectible accounts The Allowace Method involves setting aside a reserve for bad debts that are expected in the future So Answer is Allowance Method 3 A Contra Account offsets the balance in another, related account with which it is paired. So it can be set Contra Account Offsets with its parent account 4 Account Recieavale Balance 60000 Expected Balance Uncollectible Uncollectible Current Dues(2/3rd) 40000 2% 800 Past Dues(1/3rd) 20000 5% 1000 Total 1800 Less: Opening Balance -600 Net Charge 2400 Answer is 2400

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.