Question 68 (1 point)
Which of the following questions would the owner of a business be most likely to ask?
Question 68 options:
| a) | Can the business pay its existing bank loan, or borrow more? | |
| b) | Has the business filed its income tax returns correctly and on time? | |
| c) | Can the business pay the increased wages that the union is demanding? | |
| d) | Has the company followed GAAP in preparing its financial statements? | |
| e) | Is the business profitable enough to pay dividends? | |
Question 69 (3 points)
Which of the following transactions does NOT affect bad debt expense? Select all that apply. (3 marks)
Question 69 options:
| a) | using the aging method to estimate the required Allowance for Doubtful Accounts | |
| b) | writing off an account receivable | |
| c) | a sales return, where the original sale was on account | |
| d) | giving a cash refund to a customer who returned an item that he had already paid for | |
| e) | receiving a cheque from a customer whose account receivable was previously written off | |
Question 70 (2 points)
Why might the Allowance for Doubtful Accounts have a positive balance before recording the year's bad debt expense? Select all that apply.
Question 70 options:
| a) | Write-offs in the year were higher than expected. | |
| b) | The previous allowance was overestimated. | |
| c) | Write-offs in the year were lower than expected. | |
| d) | The previous allowance was underestimated. | |
| e) | There were more cash sales and fewer credit sales in the year than expected. | |