10- On average, 5% of total accounts receivable has been uncollectible in the past. At the end of the year, the balance of accounts receivable is $100,000 and the allowance for doubtful accounts has a credit balance of $500. Credit sales during the year were $150,000. Using the aging of accounts receivable method, the estimated bad debt expense would be:

• $4,500.

• $5,000.

• Cannot be determined; the aging of accounts receivable method cannot be used as the information provided can only be used for calculating the percentage of credit sales method.

• $5,500

12- Your company has averaged about 26% of its accounts receivable in the "over 90 days past due" category and now forecasts 18% in this category. You use the aging of accounts receivable method of estimating bad debt expense. If the total of credit sales remains unchanged from previous months and no write offs are made, the estimate of bad expense based on the new forecast will:

• not change.

• will depend on the percentage of credit sales deemed un-collectible.

• decrease over the estimate for previous months.

• increase over the estimate for previous months.

13- Extending credit to customers will result in which of the following additional costs?

• Increased employer costs will be incurred to evaluate customer credit worthiness, track what each customer owes, and follow up to ensure correction.

• All of the answers are acceptable.

• Delayed receipt of cash may result requiring the company to take out short-term loans and incur interest costs.

• Bad debt expense will result when amounts cannot be collected from customers.