Task: Receivables and payables
True/False
1. The practice of estimating uncollectible accounts expense at the end of each accounting period is designed to match revenue and expenses so that all expenses associated with the revenue earned in the period are recognized as expense in that same period
2. During the first year of its existence, Cross company made the most of its sales on credit but made no provision for uncollectible accounts. The result would be an overstatement of assets and owners. And understatement of expense, and an overstatement of net income.
3. Conservatism in the valuation of accounts receivable would call for holding the amount entered in Allowance for doubtful accounts to a bare minimum.
4. The balance sheet approach to estimating uncollectible accounts expense emphasizes the aging of accounts receivable and the adjustment of the allowance account to the level of the estimated uncollectible amount.
5. The income statement approach to estimating uncollectibe accounts expense does not require the use of an allowance account.
6. When the year-end provision for uncollectibe accounts expense is estimated as a percentage of sales, the estimate is recorded without regard for the existing balance in the allowance account.
7. The direct charge-off method does not cause receivables to be stated in the balance sheet at their estimated realizable value.
8. When a given account receivable is determined to be worthless, it should be written off the books by and entry debiting uncollectible Accounts Expense and crediting the Allowance for Doubtful Accounts.
9. When a company collect an account receivable previously written off as worthless, and entry should be made debiting Accounts Receivable and crediting Allowance for Doubtful Accounts. A separated entry is then made to record Collection of the Account.
10.The Write-off of an account receivable determined to be worthless by debiting the Allowance for Doubtful Accounts will not affect the net carrying Value of the Receivables in the balance sheet.
Problems:
At the end of the year the unadjusted trial balance of Vista Company included the following accounts:
Debit Credit
Sales (25% represent cash sash sales) 1,728,00
Account Receivable 432,000
Allowance for doubtful accounts 3,276
A) If Vista uses the balance sheet approach to estimating uncollectible accounts expense, and aging the accounts receivable indicates the estimated uncollectible portion to be $15,000 the uncollectible accounts.
Expense for the year will be $__________
B) If the income statement approach to estimating uncollectible accounts expense is followed, and uncollectible accounts expense is estimated to be 1% of net credit sales, the amount of uncollectible accounts expense
For the year will be $__________