Question

1.When using the allowance method for uncollectible​ accounts, the percentminus−ofminus−sales method is called​ the:

A.allowance approach.

B.Balance Sheet approach.

C.direct writeminus−off approach.

D.Income Statement approach.

How are net realizable receivables​ calculated?

A.Allowance for Doubtful Accounts plus NSF checks

B.Accounts Receivable plus the Allowance for Doubtful Accounts

C.Accounts Receivable less the Allowance for Doubtful Accounts

D.Accounts Receivable divided by the Allowance for Doubtful Accounts

On September​ 8, Alice paid​ $3,568 to Cheshire Co. to fulfill her promissory note agreement. Of the​ $3,568, $400 is interest. The journal entry Cheshire Co. will record is​ to:

A.debit​ Cash, $3,568; credit Note​ Receivable/Alice, $3,168; credit Interest​ Revenue, $400.

B.debit Note​ Receivable/Alice, $3,568; credit Cash​ $3,168; credit Interest​ Revenue, $400.

C.debit​ Cash, $3,568; credit Note​ Receivable/Alice, $3,568.

D.debit Note​ Receivable/Alice, $3,568; credit Cash​ $3,568.

Answer 1

• Answer #1
  Correct Answer = Option ‘D’ The percent of sales method is called “INCOME STATEMENT approach”>
  This is because Bad Debt Expense = % of sales, which is the part of Income Statement.
• Answer #2
  Correct Answer = Option ‘C’ Accounts receivables LESS the Allowance for Doubtful Accounts
  Accounts receivables – Allowance for Doubtful Accounts = Net Realizable value.
• Answer #3
  Correct Answer Option ‘A’
  [Debit] Cash $ 3568 [amount received]
  [Credit] Notes receivables $ 3168
  [Credit] Interest revenue $ 400