Summer2018 ACCT30121 Quiz2 Name Kerlin Cluir Ptso 1 The foll

Summer2018 ACCT301-21 Quiz2 Name Kerlin Cluir Pts:o 1. The following accounts were abstracted from Starr Co\'s unadjusted trial balance at December 31, 2017: Credit Debit $750,000 Accounts receivable Allowance for uncollectible accounts Net credit sales Starr estimates that 4.5% of the gross accounts receivable will become uncollectible. After adjustment at December 31,2017, the allowance for uncollectible accounts should 8,000 $3,000,000 have a credit balance of A) $120,000. B) S112,000. C) $33,750. D) S30,000. 2. Steinert Company has the following items at year-end: Cash in bank Petty cash Short-term paper with maturity of 2 months Postdated checks $35,000 500 8,200 2,100 Steinert should report cash and cash equivalents of A) $35,000. B) S35,500. C) S43,700. D) S45,800. 3. In preparing its May 31 bank reconciliation, Catt Co. has the followving information available: $35,000 5,400 4,900 1,250 Balance per bank statement, 5/31 Deposit in transit, 5/31 Outstanding checks, 5/31 Note collected by bank in May The correct balance of cash at May 31 is A) $40,400. B) $34,250. C) $35,500. D) $36,750 4. Why is the allowance method preferred over the direct write-off method of accounting for bad debts? A) Allowance method is used for tax purposes. B) Estimates are used. C) Determining worthless accounts under direct write-off method is difficult to do. D) Improved matching of bad debt expense with revenue.

Solution

1) Allowance for doubtful accounts = 750000*4.5% = 33750

So answer is c) $33750

2) Cash and cash equivalent = 35000+500+8200 = 43700

So answer is c) $43700

3) Correct balance of cash = 35000+5400-4900 = $35500

So answer is c) $35500

4) So answer is c) Determining worthless accounts under direct write off method is difficult to do.

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