Listed below are selected items from the financial statements of a company for the year ended December 31, Year 1.
| Salaries Payable | 63,000 |
| Accounts payable | 35,000 |
| Current Maturity of Long-Term Debt | 25,000 |
| Bonds payable, due December 31, Year 20 | 2,200,000 |
| Premium on Bonds Payable | 14,000 |
| Estimated Warranty Liability | 10,000 |
| Note Payable, due Dec. 31, Year 4 | 75,000 |
| Unearned Revenue | 25,000 |
| Note Payable, due June 1, Year 2 | 8,000 |
| Discount on Note Payable due June 1, Year 2 | 500 |
Determine the effect on a company’s Assets and net Income from the following transaction: bad debt expense is recorded by a company using the allowance method to account for bad debts.
| Assets | Net Income | |
|---|---|---|
| A | Decreased | Decreased |
| B | Decreased | No effect |
| C | Increased | No effect |
| D | Increased | Increased |
| F | None of the above | |
A company began the year with Accounts Receivable of $250,000 and a balance in Allowance for Doubtful Accounts of $11,000 (cr.). During the year, the company had credit sales of $540,000, collections on Accounts Receivable of $600,000 and wrote off $9,000 for accounts specifically identified as uncollectible. Additionally, the company collected on $2,500 of accounts previously written off during the year.
Past experience indicates that 2% of credit sales will become uncollectible.
A company estimates the cost of products warranties to be 3% of sales. The beginning balance in Estimated Warranty Liability account is $15,000. Sales for the period was $795,000. During the period, $32,600 was actually paid for warranty related costs. What is the ending balance in the Warranty Liability account?
A company provides a warranty on its products that it sells to customers. The warranty liability account had $1,200 balance on April 1. The company had sales of $67,000 in April and estimated warranty repairs at 3% of sales. During the month, the company actually paid out $2,400 for warranty repairs.
Determine the April 30 balance in the estimated warranty liability account.
Under the allowance method of recognizing uncollectible accounts, the entry to write off an uncollectible account has what effect on the following accounts (indicate Increase, Decrease, or No Effect)
At December 31, a company has the following balances:
| Accounts Receivable | 35,000 | Credit Sales | 60,000 |
| Allowance for Doubtful Accounts | 500 (credit) | Cash | 5,400 |
The company uses the balance sheet method to estimate bad debt. Management determined the estimate to be 3%. Under these circumstance, record the year-end adjusting entry for bad debt expense.
| Journal Entry 1 | |||||
|---|---|---|---|---|---|
| Bad Debt Expense | 550 | ||||
| Allowance for Doubtful Accounts | 550 | ||||