Question

1. Pac, Capital is $1,000 on Jan 1, 20xx. The company had credit sales of $90,000;...

1. Pac, Capital is $1,000 on Jan 1, 20xx. The company had credit sales of $90,000; cash collections of accounts receivable of $80,000; cost of goods sold of $30,000; operating expenses of 20,000; a gain of $10,000; owner withdrawals of $4,000 and owner investments of $1,000 during the year. Determine the December 31, 20xx balance of Pac, Capital.

   a. $74,000                 c. $128,000

   b. $48,000                 d. $ 55,000

2. REM, Inc. had assets of $44 and liabilities of $18 on January 1. During the year, assets increased $10 and liabilities decreased $9. Calculate the December 31 balance of owner’s equity.

   a. $45                     c. $62

   b. $55                     d. $35

3. James Taylor Co. has Accounts Receivable of $200,000 at February 28, 20xx. The Allowance for Bad Debts has a $6,000 credit balance. The company has aged the receivables and $50,000 have not reached the due date, $80,000 are between one and sixty days past the due and $70,000 are over sixty-one days past the due date. Estimate how much of the receivables are uncollectible and the amount of bad debt expense for the period assuming 3% of the not yet due receivables are bad; 8% of the between 1-60 day receivables are worthless and 20% of the receivables older than 61 days are worthless.

   a. $15,900 and $6,000      c. $21,900 and $15,900

   b. $6,000 and $21,900      d. None of the above

4. Terps Co. has $200,000 of accounts Receivable as of January 1, 20xx. During the current year, credit sales amounted to $500,000; cash collections of credit sales were $450,000 and sales returns were $20,000. The unadjusted credit balance of the allowance for bad debts account is $10,000 at December 31. Management estimates that six and a half percent of net credit sales are uncollectible. How much bad debt expense should the company report on the income statement?

   a. $18,500                 c. $12,500

   b. $16,500                 d. None of the above

Homework Answers

Answer #1
1
Sales 90000
Less: Cost of goods sold -30000
Less: Operating expenses -20000
Add: Gain 10000
Net income 50000
Pac, Capital, Jan 1, 20xx 1000
Add: Owner investments 1000
Add: Net income 50000
Less: Owner withdrawals -4000
Pac, Capital, December 31, 20xx 48000
Option B is correct
2
Equity = Assets-Liabilities
Equity = (44+10)-(18-9)= $45
Option A is correct
3
Age of Receivables Amount % uncollectible Amount uncollectible
Not yet due 50000 3% 1500
1-60 days 80000 8% 6400
Older than 61 days 70000 20% 14000
Total 200000 21900
Receivables uncollectible=$21900
Bad debt expense = 21900-6000 = $15900
Option C is correct
4
Bad debt expense = (500000-20000)*6.5%= $31200
Option D None of the above is correct
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