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:

Answer 1

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