Q1. The allowance for bad debts is the portion of (__________________ / sales revenue) that is estimated as uncollectible and is reported on the balance sheet as a (_____________ / noncurrent asset / current liability / noncurrent liability / stockholders’ equity).
Q2. The total amount customers owe the company on account on December 31, Year 5 is __________________. Of this amount, __________________ is estimated to be uncollectible and __________________ is estimated to be collectible. As a result of the financial statement information listed above, total assets will increase by __________________.
Q3. Bad debt expense is the portion of (accounts receivable / __________________) that is estimated as uncollectible and reported as a(n) (__________________ /non-operating) expenses on a multi-step income statement. Above, sales revenue earned during Year 5 totals __________________, and of that amount, __________________ is estimated to be uncollectible.
Q4. Bad debt expense is a(n) (__________________ / known) amount calculated (__________________ / during) each accounting period and recorded as an adjustment. This is an application of the (cost / __________________ / historical cost) principle. The adjustment to record bad debt expense changes (total assets / net income / __________________ / neither). Why?
Q5. Above, the (__________________ / direct write-off) method is used to report uncollectible accounts. Using the above amounts, assume that $2,000 owed by Customer Ryan was written off as uncollectible. After the write-off, the accounts would report: Accounts receivable (____________ / $90,000 / $92,000), Allowance for bad debts (____________ / $4,000 / $6,000), and Accounts receivable, net ($84,000 / ____________ / $88,000). The write-off of an uncollectible account changes (total assets / net income / both / __________). Why?
Accounts receivable, net is also referred to as net realizable value.
Bad debt expense is also referred to as doubtful-account expense or uncollectible account expense. Non-operating revenues and expenses are also referred to as other gains and losses.