Normal No SpacingHeading1 14 The account Allowance for Uncol

Normal No SpacingHeading1 14. The account Allowance for Uncollectible Accounts is necessary because management should know how many credit losses have been sustained over the years. when recording uncollectible accounts expense, it is not possible to predict specifically which accounts will not be collected. uncollected accounts that are written off must be accumulated in a separate account. a liability results when a credit sale is made. a. b. c. d. 15. The general ledger account for Accounts Receivable shows a debit balance of $25,000. Allowance for Uncollectible Accounts has a credit balance of S1,500. Net sales for the year were $250,000. In the past, 3 percent of net sales have proved uncollectible, and an aging of accounts receivable resulted in an estimate of $10,000 in uncollectible accounts receivable. Using the accounts receivable aging method, the Uncollectible Accounts Expense would be debited for a. $8,500. b. $11,500. c. $10,750. d. $10,000.

Solution

14) The Allowance for Doubtful Accounts is necessary because when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay The Allowance for Doubtful Accounts is used when Bad Debt Expense is recorded prior to knowing the specific accounts receivable that will be uncollectible. 15) The general ledger account for Accounts Receivable shows a debit balance of $25 ,000. The Allowance for Uncollectible Accounts has a credit balance of $1,500. Net sales for the year were $250,000. In the past, 3 percent of net sales have proved uncollectible. An aging of accounts receivable accounts results in an estimate of $10,000 of uncollectible accounts receivable Uncollectible Accounts Expense = ($10,000 - $1500) $8,500.00 28) On January 2, 20x7, Barham Corporation issued ten-year bonds payable with a face value of $400,000 and a face interest rate of 9 percent. The bonds were issued to yield a market interest rate of 10 percent. Interest is payable semiannually on January 2 and July 1. In calculating the present value of the bond issue on January 2, 20x7. Chose the answer \'a 5 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments.\' A) the 9 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments. B) a 5 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments. C) the 10 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments. D) the 10 percent rate will be used to calculate the present value of the face amount and a 5 percent rate will be used to calculate the present value of the periodic interest payments. Coupon Interest is paid semiannually so present value of the periodic interest payments will be calculated semiannually (10%/2 = 5%) 29) Lassen Corporation issued ten-year term bonds on January 1, 20x5, with a face value of $800,000. The face interest rate is 6 percent and interest is payable Amortization Schedule A B C D E F G Period Interest Payment = 6%/2 x $800,000 Interest exp.= 8%/2 x Previous BV in G Amortisation of bond discount (C - B) Debit Bal. Bond discount Cr. balance Bonds payable account Book value of bond (F-E) Jan 2007 $109,040.00 $800,000.00 $690,960.00 June 2007 24000 $27,638.40 $3,638.40 $105,401.60 $800,000.00 $694,598.40 Dec 2007 24000 $27,783.94 $3,783.94 $101,617.66 $800,000.00 $698,382.34 Total $48,000.00 $55,422.34