A major shortcoming of the direct write-off method is that credit losses are:
Select one:
A. Not shown in the subsidiary ledger
B. Not matched with sales
C. Sometimes collected at a future date
D. Never recognized
A major shortcoming of the direct write-off method is that credit losses are:
Select one:
A. Not shown in the subsidiary ledger
B. Not matched with sales
C. Sometimes collected at a future date
D. Never recognized
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Related questions
On December 31, the unadjusted trial balance of Leeâs CoffeeDistributor contains the following:
Debit | Credit | |
Accounts Receivable | 240,000 | |
Allowance for Doubtful Accounts | 3,000 | |
Cash Sales | 1,500,000 | |
Credit Sales | 950,000 |
The A/R subsidiary ledger yields the following aging [terms are1/10, n/30] and subsequent analysis:
Total | Current | 1-30 days past due | 31-60 days past due | 61-90 days past due | More than 90 days past due |
$240,000 | 110,000 | 60,000 | 30,000 | 10,000 | 30,000 |
Write-off percentage | 1.50% | 4.00% | 7.00% | 10.00% | 25.00% |
Estimated write-off |
Assume that instead of the A/R aging method [% of receivablesapproach], Lee's Coffee Distributors uses the % of credit salesapproach with respect to the allowance method for bad debts, andthe prior 5 year history through December 31 of the current yearshows write-offs have averaged 1.5% of credit sales. Which one ofthe following statements is correct (true) as of December 31 of thecurrent yea
On December 31, the unadjusted trial balance of Leeâs CoffeeDistributor contains the following:
Debit | Credit | |
Accounts Receivable | 240,000 | |
Allowance for Doubtful Accounts | 3,000 | |
Cash Sales | 1,500,000 | |
Credit Sales | 950,000 |
The A/R subsidiary ledger yields the following aging [terms are1/10, n/30] and subsequent analysis:
Total | Current | 1-30 days past due | 31-60 days past due | 61-90 days past due | More than 90 days past due |
$240,000 | 110,000 | 60,000 | 30,000 | 10,000 | 30,000 |
Write-off percentage | 1.50% | 4.00% | 7.00% | 10.00% | 25.00% |
Estimated write-off |
Assume that instead of the A/R aging method [% of receivablesapproach], Lee's Coffee Distributors uses the % of credit salesapproach with respect to the allowance method for bad debts, andthe prior 5 year history through December 31 of the current yearshows write-offs have averaged 1.5% of credit sales. Which one ofthe following statements is correct (true) as of December 31 of thecurrent year?
A. The net A/R reported on the balance sheet would be$225,750
B. The AJE made would include a debit to "bad debt expense" for$11,250
C. The write-off % of 1.5% used for the current year AJE issmaller than the write-off % used to make the prior year AJE.
D. The AJE made would be included as an "outflow of cash" in theoperating activities section of the statement of cash flows.
Understanding the management assertions related to a specificcontrol is an important factor in preparing the tests of controls.Using the assertions provided below, select the managementassertion(s) that relates to the purpose of the controls in thetable. (A management assertion may be selected once, more thanonce, or not at all.)
Management Assertions
(a) Existence or occurrence
(b) Completeness
(c) Rights and obligations
(d) Valuation or allocation
(e) Presentation and disclosure
(f) Authorization
(g) Cutoff
Purpose of Control | Management Assertion |
|---|---|
To ensure that credit is approved before a sale is executed andservice is provided or goods are shipped | |
To ensure that transactions shown as sales are properlyclassified | |
To ensure that when cash receipts are recorded they show cashthat was actually received by the company and deposited | |
To ensure that cash receipts transactions are properly posted tothe accounts receivable subsidiary ledger and general ledger | |
To ensure that all cash received by the company is deposited andrecorded in the cash receipts journal and that amounts and details,including the date, are shown correctly | |
To ensure that sales transactions are recorded based on thecorrect dates |
