1. During a checking reconciliation at the end of the month, the company discovered an error in the company records when compared against the bank statement. The company determined that it had recorded a check in the amount of $6,300 rather than the appropriate amount of $3,600.

Which of the following describes the appropriate procedure to reconcile this error.

1. Adjust the end of month book balance by subtracting $2,700.
2. Adjust the end of month book balance by adding $2,700.
3. Adjust the end of month bank balance by adding $2,700.
4. Adjust the end of month bank balance by subtracting $2,700.
5. None of the above.

2. Use the following information concerning Vallartas credit-related account balances to determine the amount of bad debt expense that should be recognized. Vallarta uses a 1% estimate and the income statement method.

Accounts receivable	$1,250,000
Sales return	11,000
Sales discounts	7,500
Credit sales revenue	3,250,000
Allowance for sales returns	16,250
Allowance for doubtful accounts	5,500

1. $12,500
2. $26,815
3. $27,000
4. $32,315
5. $32,500

3. Which of the following best describe what beginning balances at 1/1/2022 in the allowance for sales returns and allowance for doubtful account represent?
   1. The total estimated returns and estimated defaults of customer accounts predicted by sales and transactions from the 2022 period recognized in 2021 period net income.
   2. The total estimated returns and estimated defaults of customer accounts predicted by sales and transaction from the 2021 period and recognized in 2021 period net income.
   3. The total estimated returns and estimated defaults of customer accounts predicted by sales and transaction from the 2021 period to be recognized in 2022 period net income.
   4. The total actual returns and actual defaults of customer accounts predicted by sales and transactions from the 2021 period to be recognized in 2022 period net income.
   5. The total actual returns and actual defaults of customer accounts predicted by sales and transaction from the 2021 period recognized in 2021 period net income.

4. Which of the following would be considered a cash equivalent at 12/31/x2?
   1. Cash dividends that will be paid to the company on 2/1/x3/.
   2. Cash that is part of a savings account that is bound by legal restrictions until 7/1/x3/
   3. Advances to employees that will be deducted against their future paychecks at 1/3/31/x3
   4. Treasury bill that will mature 2/1/x3 with an original maturity of one year.
   5. An investment maturing on 3/1/x3 with an original maturity of 90 days.

5. Each of the following is true regarding the allowance methods (balance sheet and income statement) for recording bad debt expense EXCEPT:
   1. When an account is written off, it does not change the value of receivables reported on the balance sheet (i.e., the net realizable value)
   2. It is prescribed under USA GAAP over the direct write-off method.
   3. It allows the matching principle to be applied in assessing bad debt expense to sales in the same period that the sale is made.
   4. It allows companies to defer the recognition of bad debt expense to a period after the actual write-off of an account in default.
   5. The balance sheet method is generally more accurate in portraying total doubtful accounts than the income statement method.

Use the following information was pulled from the balance sheet of Sazed Inc to answer problems #9 and #10. Assume the company allows no sales returns and its only allowance is an allowance for doubtful accounts.

• The company recorded bad debt expense of $18,500 during 20x2.
• The company had no reinstatements of prior bad debt nor any recoveries during 20x2.
• The company recorded credit sales revenue of $437,000 during 20x2.

	12/31/x2	12/31/x3
Accounts receivable, net of allowance for doubtful accounts $32,000 and $27,000 at year-end x2 and x1, respectively	$300,000	$410,000

6. What were the amount of account write-offs that occurred during the year x2?
   1. $5,000
   2. $13,500
   3. $18,500
   4. $268,000
   5. Indeterminable given the information presented.