Use the following information about Tiger Corporation to answer the next four questions. The Accounts Receivable balance for Tiger Corporation is $164,000 at October 31, 2021. Before calculating and recording October 2021 bad debt expense, the Allowance for Doubtful Accounts has a debit balance of $6,000. Sales for the month are $1,900,000. An aging of accounts receivable results in a $34,400 estimate for the Allowance for Doubtful Accounts as of October 31, 2021. In the past several years, 2% of sales have proven uncollectible. If Tiger uses the percent of sales method, Bad Debt Expense on the October 2021 Income Statement will be: $32,000. $34,400. $38,000. $40,400. If Tiger uses the percent of sales method, the Allowance for Doubtful Accounts reflected on the October 31, 2021 Balance Sheet will be: $32,000. $34,400. $38,000. $40,400. If Tiger uses the analysis of receivables method, Bad Debt Expense on the October 2021 Income Statement will be: $32,000. $34,400. $38,000. $40,400.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Use the following information about Tiger Corporation to answer the next four questions.
The
- If Tiger uses the percent of sales method, Bad Debt Expense on the October 2021 Income Statement will be:
- $32,000.
- $34,400.
- $38,000.
- $40,400.
- If Tiger uses the percent of sales method, the Allowance for Doubtful Accounts reflected on the October 31, 2021
Balance Sheet will be:- $32,000.
- $34,400.
- $38,000.
- $40,400.
- If Tiger uses the analysis of receivables method, Bad Debt Expense on the October 2021 Income Statement will be:
- $32,000.
- $34,400.
- $38,000.
- $40,400.
- If Tiger uses the analysis of receivables method, the Allowance for Doubtful Accounts reflected on the October 31, 2021 Balance Sheet will be:
- $32,000.
- $34,400.
- $38,000.
- $40,400.
- A $4,000, 120-day, 9% note was received on October 13 and the fiscal year ended on October 31. Interest will be paid by the borrower on the maturity date of the note. The
adjusting entry made on October 31 to record the interest receivable is (amounts rounded to nearest dollar, use 360-day year):
- Interest Revenue 54
Interest Receivable 54
- Cash 360
Interest Revenue 360
- Interest Receivable 18
Interest Revenue 18
- Interest Receivable 120
Interest Revenue 120
- Which of the following statements is TRUE?
- The
journal entry to write-off an account includes a debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. - The journal entry to record Bad Debt Expense causes Total Assets to decrease.
- The journal entry to record an uncollectible accounts write-off causes Total Assets to decrease.
- All of the statements are true.
- The
- PepsiCo, Inc. sells $1,400,000 of its products to AMC Entertainment Holdings, Inc. AMC signs a promissory note that has the following terms: annual interest rate of 5% and principal plus interest due in 6 months. Assuming that AMC repays the entire amount as scheduled after 6 months, what is the Maturity Value of PepsiCo's note receivable?
- $1,470,000
- $1,435,000
- $1,400,000
- $1,365,000
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