Reference no: EM132138548
Questions -
Q1. Our company uses the percentage of sales method to estimate bad debt expense for the year. Our allowance for bad debts account has a debit balance of $1,000 prior to the adjusting entry for bad debt expense. We have estimated that 2% of net credit sales will be uncollectible for the current year. Net credit sales for the year totaled $200,000. What will be the balance in allowance for bad debts after the adjusting entry is recorded?
$3,000
$4,000
$5,000
$6,000
Q2. Our company uses the percentage of receivables method to estimate bad debt expense for the year. We had the following account balances on our unadjusted trial balance at the end of the year (December 31): accounts receivable, debit balance of $150,000; allowance for bad debts, debit balance of $1,000. We estimate that 3.5% of accounts receivable at the end of the year are uncollectible. What will be the balance in allowance for bad debts after the adjusting entry is recorded?
$4,000
$4,250
$5,250
$6,250
Q3. When using the allowance method to estimate bad debt, what will an entry to write off an account receivable using the allowance method do?
increase net income
decrease net income
have no effect on net income
increase liabilities
Q4. On January 1, our company purchased a truck for $80,000. The estimated useful life of the truck is 4 years. The residual value at the end of 4 years is estimated to be $10,000. What is the depreciation expense for the third year of use if we use the straight-line method?
$17,500
$20,000
$35,000
$52,500
Q5. Use the following information to answer these questions.
On January 1, our company purchased a truck for $80,000. The estimated useful life of the truck is 4 years. The residual value at the end of 4 years is estimated to be $10,000.
What is the depreciation expense for the second year of use if we use the double-declining balance method?
$40,000
$35,000
$22,500
$20,000
What is the balance in accumulated depreciation at the end of the second year of use if we use the double-declining balance method?
$40,000
$35,000
$60,000
$57,500
What is the book value at the end of the second year of use if we use the double-declining balance method?
$20,000
$22,500
$45,000
$40,000
Q6. On January 1 of the current year (Year 1), our company acquired a truck for $75,000. The estimated useful life of the truck is 5 years or 100,000 miles. The residual value at the end of 5 years is estimated to be $5,000. The actual mileage for the truck was 22,000 miles in Year 1 and 27,000 miles in Year 2. What is the depreciation expense for the second year of use (Year 2) if we use the units of production method?
$14,000
$15,400
$16,800
$18,900