1. Flyer Company has provided the following information prior to any year-end bad debt adjustment:

• Cash sales, $158,000
• Credit sales, $458,000
• Selling and administrative expenses, $118,000
• Sales returns and allowances, $38,000
• Gross profit, $498,000
• Accounts receivable, $185,000
• Sales discounts, $22,000
• Allowance for doubtful accounts credit balance, $2,000

Flyer estimates bad debt expense assuming that 1.5% of credit sales have historically been uncollectible. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?

Multiple Choice

• $8,870.

• $7,240.

• $6,870.

• $4,870.

2. Madrid Company has provided the following data (ignore income taxes):

2019 revenues were $92,500.

2019 net income was $35,700.

Dividends declared and paid during 2019 totaled $7,500.

Total assets at December 31, 2019 were $235,000.

Total stockholders' equity at December 31, 2019 was $154,000.

Retained earnings at December 31, 2019 were $97,000.

Which of the following is not correct?

Multiple Choice

• Common stock at December 31, 2019 was $57,000.

• Total liabilities at December 31, 2019 were $81,000.

• 2019 expenses were $56,800.

• Retained earnings increased $35,700 during 2019.