(Multiple Choice) 1. All America Bank, the nationwide banking company, owns many types of investments. Assume that...

Question:

(Multiple Choice)
1. All America Bank, the nationwide banking company, owns many types of investments. Assume that All America Bank paid $650,000 for trading securities on December 5. Two weeks later, All America Bank received a $45,000 cash At December 31, these trading securities were quoted at a market price of $655,000. All America Bank€™s December income statement should report
a. unrealized loss of $5,000.
b. unrealized loss of $3,000.
c. unrealized gain of $50,000.
d. unrealized gain of $5,000.

2. Refer to the All America Bank data in Quiz question 5-45. At December 31, All America Bank€™s should report
a. short-term investment of $655,000.
b. unrealized gain of $5,000.
c. short-term investment of $650,000.
d. revenue of $45,000.

3. Under the allowance method for uncollectible receivables, the entry to record uncollectible account expense has what effect on the financial statements?
a. Decreases owners€™ equity and increases liabilities
b. Decreases net income and decreases assets
c. Increases expenses and increases owners€™ equity
d. Decreases assets and has no effect on net income

4. Maverson Company uses the aging method to adjust the allowance for uncollectible accounts at the end of the period. At December 31, 2012, the balance of is $220,000, and the allowance for uncollectible accounts has a credit balance of $3,000 (before adjustment). An analysis of produced the following age groups:

Based on past experience, Maverson estimates that the percentage of accounts that will prove to be uncollectible within the three age groups is 2%, 8%, and 20%, respectively. Based on these facts, the adjusting entry for uncollectible accounts should be made in the amount of
a. $12,480.
b. $5,480.
c. $11,480.
d. $8,480.

5 Refer to Question 5-48. The net receivables on the balance sheet is ____________.

6. Linus Company uses the percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $100,000, and management estimates 2% will be uncollectible.
Allowance for doubtful accounts prior to adjustment has a credit balance of $3,000. The amount of expense to report on the income statement will be
a. $5,000.
b. $1,500.
c. $6,000.
d. $2,000.

7. Refer to question 5-50. The balance of Allowance for Doubtful Accounts, after adjustment, will be
a. $5,000.
b. $2,000.
c. $1,000.
d. $1,500.

8. Refer to Quiz questions 6 and 7. The following year, Linus Company wrote off $2,000 of old receivables as uncollectible. What is the balance in the Allowance account now?

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