5. A company used the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? A. Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750. B. Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225. C. Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250. D. Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

6. Bad Debts Expense is reported on the income statement as

A. Part of cost of goods sold.

B. Reducing gross profit.

C. An operating expense.

D. A contra-revenue account.

7. When the allowance method of accounting for uncollectible accounts is used, Bad Debts 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.

8. 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.

9. A gain or loss on disposal of a plant asset is determined by comparing the

A. Replacement cost of the asset with the asset's original cost.

b. Book value of the asset with the asset's original cost.

C. Original cost of the asset with the proceeds received from its sale.

D. Book value of the asset with the proceeds received from its sale.

10. The book value of a plant asset is the difference between the

A. Replacement cost of the asset and its historical cost.

B. Cost of the asset and the amount of depreciation expense for the year.

C. Cost of the asset and the accumulated depreciation to date.

D. Proceeds received from the sale of the asset and its original cost

Accounts receivable Allowance for Doubtful Accounts Net Sales $435,000 Debit 1,250 Debit 2,100,000 Credit