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51.False Value Hardware began 2016 with a credit balance of

Question : 51.False Value Hardware began 2016 with a credit balance of : 1412678

 

 

51.False Value Hardware began 2016 with a credit balance of $32,000 in the allowance for sales returns account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. False Value estimates that 6% of all sales will be returned. During 2016, customers returned merchandise for credit of $28,000 to their accounts.

What is the balance in the allowance for sales returns account at the end of 2016?  
 
 

A.$11,000.

 

B.$39,000.

 

C.$43,000.

 

D.$21,000.

$32,000 + 39,000($650,000 × 6%) - 28,000 = $43,000

 

 

 

52.False Value Hardware began 2016 with a credit balance of $32,000 in the allowance for sales returns account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. False Value estimates that 6% of all sales will be returned. During 2016, customers returned merchandise for credit of $28,000 to their accounts.

False Value's 2016 income statement would report net sales of:  
 
 

A.$622,000.

 

B.$607,000.

 

C.$646,000.

 

D.$611,000.

$650,000 - 39,000($650,000 × 6%) = $611,000

 

 

 

53.Rusty Hardware makes only cash sales. It began 2016 with a credit balance of $32,000 in the refund liability account. Sales during 2016 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2016, customers returned merchandise for credit of $28,000 to their accounts.

What is the balance in the allowance for sales returns account at the end of 2016?  
 
 

A.$32,000.

 

B.$39,000.

 

C.$43,000.

 

D.$40,000.

$32,000 + 36,000($600,000 × 6%) - 28,000 = $40,000

 

 

 

54.Rusty Hardware makes only cash sales. It began 2016 with a credit balance of $32,000 in the refund liability account. Sales during 2016 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2016, customers returned merchandise for credit of $28,000 to their accounts.

Rusty's 2016 income statement would report net sales of:  
 
 

A.$600,000.

 

B.$564,000.

 

C.$568,000.

 

D.$604,000.

$600,000 - 36,000($600,000 × 6%) = $564,000

 

 

 

55.Accounts receivable are normally reported at the:  
 
 

A.Present value of future cash receipts.

 

B.Current value plus accrued interest.

 

C.Expected amount to be received.

 

D.Current value less expected collection costs.

 

 

 

 

56.The allowance for uncollectible accounts is a: 
 
 

A.Deferred charge to expense.

 

B.Contra asset account.

 

C.Deferred revenue account.

 

D.Quasi-liability account.

 

 

 

 

57.A company uses the allowance method to account for bad debts. What is the effect on each of the following accounts of the collection of an account previously written off?
 

Allowance for
Uncollectible AccountsAccounts  Receivable

a.IncreaseDecrease

b.No effectDecrease

c.IncreaseNo effect

d.No effectNo effect

 


 
 

A.Option A

 

B.Option B

 

C.Option C

 

D.Option D

 

 

 

 

58.Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in: 
 
 

A.Accounts receivable.

 

B.Allowance for uncollectible accounts.

 

C.Bad debts expense.

 

D.Retained earnings.

 

 

 

 

59.Which of the following does not reduce the balance in accounts receivable? 
 
 

A.Returns on credit sales.

 

B.Collections from customers.

 

C.Recognizing bad debts expense.

 

D.Write-offs.

 

 

 

 

60.Chez Fred Bakery estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable. During 2016, Chez Fred's credit sales and collections were $125,000 and $131,000, respectively. What was the balance of accounts receivable on January 1, 2016, if $180 in accounts receivable were written off during 2016 and if the allowance account had a balance of $750 on December 31, 2016?  
 
 

A.$5,820.

 

B.$31,000.

 

C.$31,180.

 

D.None of these answer choices are correct.

 

A/R 1/1/2016?

Collections(131,000)

Write-offs(180)

Credit sales125,000

A/R 12/31/2016$25,000[$750 = 3% of AR; so AR = $750 ç .03 = $25,000]


Therefore, A/R, 1/1/2016 = $31,180

 

 

 

 

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