Question
2. A company uses the percentage of sales method to estimate the bad debt expense. Credit sales revenue is $15,500,000 and cash sales revenue is
2. A company uses the percentage of sales method to estimate the bad debt expense. Credit sales revenue is $15,500,000 and cash sales revenue is $8,500,000. The company uses an estimate of 3% of credit sales revenue to estimate bad debts expense. There already is a credit balance of $200,000 in the Allowance account. The journal entry to record bad debt expense that includes:
- A credit to Allowance for Doubtful Accounts for $265,000
- A credit to Allowance for Doubtful Accounts for $460,000
- A debit to Bad Debt Expense for $465,000
- A debit to Bad Debt Expense for $720,000
5. Suppose you are computing inventory with the average cost method. Cost of Goods Sold Expense was $212,500.00 and 2,500 units were sold; there were 475 units in Ending Inventory and 250 units in Beginning Inventory. What is the dollar amount of Goods Available for Sale?
- $231,625
- $233,750
- $238,000
- $252,875
9. Consider the operating section in a Statement of Cash Flows. Which statement is most true about the operating section? The operating section:
a. takes a cash basis statement of operations and connects it to various changes in current operating accounts from the balance sheet b. takes a cash basis statement of operations and adjusts for various non-cash items to give a more accurate portrayal of cash flow from operations
c. takes net income from the income statement and adjusts for various non-cash items and accruals to get to a cash basis statement of operations
d. takes net income from the income statement and adjusts for changes in investing and financing activities to get to a cash basis statement of operations
- Deferred taxes would be related to:
a. a company choosing the same accounting principles for books and tax
b. a company trying to pay taxes early than necessary
c. a company having to keep two sets of records for depreciation
d. a company making its recordkeeping more simple
- Consider lease agreements. Which statement is false?
a. A finance lease is a way to finance the acquisition of a long-term asset.
b. An operating lease is based on the idea of substance over form.
c. The lessee in a finance lease records an asset on its balance sheet.
d. The lessee in a finance lease records interest expense on its income statement.
- ABC Company has 15 employees who earn $200 a day. The employees worked Monday, December 28 through Friday, January 1, 20X1, and then Monday, January 4 through Friday, January 8, 20X2. The time period of Monday, December 28, 20X1 to Friday, January 4, 20X2 was the 2 week pay period. ABC has a year-end on Thursday, December 31, 20X1. On Thursday, December 31, 20X1, ABC estimated the amount of salary expense that should be recognized in 20X1. On Friday, January 8, 20X2, ABC paid the employees for the 2 week pay period. Which journal entry is the correct journal entry on Friday, January 8, 20X2?
| a. | Salaries Expense | $30,000.00 | |
| Cash | $30,000.00 | ||
| b. | Salaries Expense | $18,000.00 | |
| Salaries Payable | $12,000.00 | ||
| Cash | $30,000.00 | ||
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| c. | Salaries Expense | $15,000.00 | |
| Salaries Payable | $15,000.00 | ||
| Cash | $30,000.00 | ||
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| d. | Salaries Payable | $12,000.00 | |
| Cash | $12,000.00 |
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