The following questions are used in the Kaplan CPA Review Course to study receivables while preparing for the CPA examination. Determine the response that best completes the statements or questions.

1. At January 1, 2011, Simpson Co. had a credit balance of $260,000 in its allowance for uncollectible accounts. Based on past experience, 2 percent of Simpson's credit sales have been uncollectible. During 2011, Simpson wrote off $325,000 of accounts receivable. Credit sales for 2011 were $9,000,000. In its December 31, 2011, balance sheet, what amount should Simpson report as allowance for uncollectible accounts?

a. $115,000

b. $180,000

c. $245,000

d. $440,000

2. The balance in accounts receivable at the beginning of 2011 was $600. During 2011, $3,200 of credit sales were recorded. If the ending balance in accounts receivable was $500 and $200 in accounts receivable were written off during the year, the amount of cash collected from customers was

a. $3,100

b. $3,200

c. $3,300

d. $3,800

3. 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?

4. The following information relates to Jay Co.'s accounts receivable for 2011:

What amount should Jay report for accounts receivable, before allowances, at December 31, 2011?

a. $ 925,000

b. $1,085,000

c. $1,125,000

d. $1,200,000

5. Gar Co. factored its receivables without recourse with Ross Bank. Gar received cash as a result of this transaction, which is best described as a

a. Loan from Ross collateralized by Gar's accounts receivable.

b. Loan from Ross to be repaid by the proceeds from Gar's accounts receivables.

c. Sale of Gar's accounts receivable to Ross, with the risk of uncollectible accounts transferred to Ross.

d. Sale of Gar's accounts receivable to Ross, with the risk of uncollectible accounts retained by Gar.

6. The following information pertains to Tara Co.'s accounts receivable at December 31, 2011:

During 2011, Tara wrote off $7,000 in receivables and recovered $4,000 that had been written off in prior years. Tara's December 31, 2010, allowance for uncollectible accounts was $22,000. Under the aging method, what amount of allowance for uncollectible accounts should Tara report at December 31, 2011?

a. $ 9,000

b. $10,000

c. $13,000

d. $19,000

7. West Company had the following account balances at December 31, 2011, before recording bad debt expense for the year:

Accounts receivable .............. $ 900,000

Allowance for uncollectible accounts (credit balance) . 16,000

Credit sales for 2011 ............. 1,750,000

West is considering the following methods of estimating bad debts for 2011:

• Based on 2% of credit sales

• Based on 5% of year-end accounts receivable

What amount should West charge to bad debt expense at the end of 2011 under each method?