Question

Question 23 2.5 pts

Gross Accounts Receivable is $20,000. Allowance for Doubtful Accounts has a credit balance of $400. Net credit sales for the year are $125,000. In the past, 2% of credit sales had proved uncollectible, and an aging of the receivables indicates $1,500 is doubtful. Under the income statement approach, Bad Debts Expense for the year is:

$2,900

$1,100.

$2,500.

$1,900.

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Question 24 2.5 pts

Gross Accounts Receivable is $20,000. Allowance for Doubtful Accounts has a credit balance of $400. Net credit sales for the year are $125,000. In the past, 2% of credit sales had proved uncollectible, and an aging of the receivables indicates $1,500 is doubtful. Under the balance sheet approach, Bad Debts Expense for the year is:

$2,500.

$1,100.

$1,900.

$2,900.

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Question 25 2.5 pts

Cost of Goods Sold includes:

Freight-out.

Net Sales.

Freight-in.

Supplies Expense.

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Question 26 2.5 pts

How is Income Summary closed if the company had a net loss?

Debit Withdrawals; credit Capital

Credit Income Summary; debit Capital

Debit Income Summary; credit Capital

Debit Capital; credit Revenue

Answer 1

23. Under Income statement approach, the bad debts are measured as a % of Sales

Bad Debt Expense = Sales * % of Debts uncollectible = $125000 * 2% = $2500

24. Under Balance - Sheet Approach the bad debts can be measured on the ending accounts receivable or as per the aging schedule.

Here as per aging schedule $1500 are found to be doubtful. Out of this $400 are already recorded under allowance for doubtful debts.

Therefore bad debt expense for the year = $1500 - $400 = $1100

25. Cost of Goods Sold includes Freight - in

26. In case of net loss,

Credit income summary, debit Capital