1a.A customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and the financing charge is 6% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a monthly finance charge is added to the customer's account.

What is the amount of the finance charge?

a $8

b $20

c $80

d $240

1b.If a company fails to record estimated bad debts expense,

a cash realizable value is understated.

b expenses are understated.

c revenues are understated.

d receivables are understated.

1c.An aging of a company's accounts receivable indicates that $14,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a

a. debit to Bad Debt Expense for $14,000.

b debit to Allowance for Doubtful Accounts for $12,900.

c debit to Bad Debt Expense for $12,900.

d credit to Allowance for Doubtful Accounts for $14,000.

1dWhen the allowance method of accounting for uncollectible accounts is used, Bad Debt

Expense is recorded

a in the year after the credit sale is made.

b in the same year as the credit sale.

c as each credit sale is made.

d when an account is written off as uncollectible.

Ortiz Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $600,000 and credit sales are $2,700,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Ortiz Company make to record the bad debts expense?

a Bad Debt Expense ........................................................... 33,000

Allowance for Doubtful Accounts ......................... 33,000

b Bad Debt Expense ........................................................... 27,000

Allowance for Doubtful Accounts ......................... 27,000

c Bad Debt Expense ........................................................... 27,000

Accounts Receivable .............................................. 27,000

d Bad Debt Expense ........................................................... 33,000

Accounts Receivable .............................................. 33,000