Why do we have an allowance for doubtful accounts?

1

10 000 .

2.

2

The Allowance for doubtful accounts is an

1

Contra-asset account

Liability account

Expense account

Asset account

3.

3

Baz corp. is a jewelry company that sells custom rings. At the beginning of the year, their customers owed them $2,500,000 but they estimated about $300,000 would not actually be collected. At the end of the year, their customers owed them $2,550,000 and estimated $550,000 would not be collected. What amount would they present for accounts receivable on their year end balance sheet?

1

4.

4

Continuing with Baz corp, recall at the beginning of the year, their customers owed them $2,500,000 and they had an allowance for doubtful accounts of $300,000. At the end of the year, their customers owed them $2,550,000 and they had an allowance for doubtful accounts of $550,000. What was bad debt expense for this year?

1

5.

5

The bad debt expense for Baz for this year will be included in the income statement as:

1

It depends.

By reducing revenues for the period.

In cost of goods sold

In selling, general and administrative

As its own line item

6.

6

Chacko corp is a distributor of exotic fruits and vegetables. At the beginning of the year they had an allowance for doubtful accounts of $1,100,000. At the end of the year they determined their balance in the allowance should be $900,000. They did not "write off" any accounts or make any other adjustments to the allowance during the during the year. How much would they recognize for bad debt expense during the year?

1

-$200,000

$200,000

$900,000

7.

7

In the next year, Chacko finds out that one of its customers, Gula Inc, went bankrupt and will not pay. Gula owed Chacko $4,000. How would that impact the numbers reported on Chackos balance sheet and income statement?

1

It would not impact either statement.

It would reduce accounts receivable reported on the balance sheet, but not impact the income statement.

It would increase the bad debt expense on the income statement and decrease accounts receivable on the balance sheet.

It would increase the bad debt expense on the income statement, but have no impact on the balance sheet.