1-A company's preliminary trialbalance reflects an accounts receivable balance of $80,000 and a debit balance in the Allowance for Doubtful Accounts of $300. Per review of the Aged Receivables listing, 50% of the accounts receivable are current and 50% are over-due. Management estimates that 3% of the current accounts and 5% of the over-due accounts will be uncollectible. The adjusting journal entry to update the Allowance for Doubtful accounts is for

a-$3,200

b-$4,000

c-$3,400

d-$3,500

e-$2,900

2-The use of the allowance method for estimating bad debts can best be described as an illustration of:

a-Some other principle

b-The Matching principle

c-The Materiality principle

d-The Allowance principle

e-The Conservatism principle

3-Use the information in the table to answer the question below about Mary's Boutique

YEAR

SALES

CASH COLLECTIONS

WRITE OFFS

2002

450,000

410,000

35,000

2003

500,000

450,000

25,000

2004

800,000

590,000

47,000

2005

820,000

750,000

20,000

If Mary's Boutique uses the direct write off method, what is the balance in Accounts Receivable at the end of 2005?

$50,000

$243,000

$643,000

$2,570,000

$127,000

4-Which of the following is a valid alternative action for an organization to take to minimize credit losses?

a-Implement a system of formal naming and shaming for customers making late payments.

b-Review accounts receivables on a regular basis.

c-Never sell on credit.

d-None of the other alternatives are correct

e-Force collections with expensive penalties for late payments.

5-Assume Cain lends $1,000 to Abel and takes back a Note which matures in 1 year and the borrowing rate is 4% per annum.

a-If the note is paid on maturity then Abel will record $40 in interest income

b-If the note is paid on maturity then Abel will record $40 in interest expense

c-If Cain prepares financial statements prior to the maturity date of the note, he will have to make an adjusting entry to set up the interest expense incurred

d-None of the above statements are correct

e-If the note is dishonoured on maturity then Abel will set up a receivable for more than $1,000