1) When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when *

a) A customer's account becomes past-due.

b) An account becomes bad and is written off.

c) A sale is made.

d) Management estimates the amount of uncollectibles.

2) ARE Company on July 15 sells merchandise on account to JOE for $1,000, terms 2/10, n/30. On July 20, JOE returns merchandise worth $400 to ARE Company. On July 24, payment is received from JOE for the balance due. What is the amount of cash received? *

a) $580

b) $588

c) $1,000

d) $600

3) Two bases for estimating uncollectible accounts are: *

a) Percentage of assets and percentage of sales.

b) Percentage of receivables and percentage of total revenue.

c) Percentage of current assets and percentage of sales.

d) Percentage of receivables and percentage of sales.

4) Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $10,000. If the balance of the Allowance for Doubtful Accounts is $2,000 debit before adjustment, what is the amount of bad debts expense for that period? *

a) $10,000

b) $12,000

c) $8,000

d) $2,000