Which statement is false? Bad debts

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Presentation transcript:

Which statement is false? Bad debts Are estimated in the period in which sales are recognized to properly match revenue and expenses are shown on the income statement as An expense of generating sales; a certain amount is expected are shown on the income statement as a loss because they are avoidable with proper procedures May be recognized using either the % of sales or the aging of accounts method

X Company uses the allowance method; it writes off an account X Company uses the allowance method; it writes off an account. Which of the following is true? Stockholders’ equity remains the same Total assets remain the same Total expenses remain the same None of the above All of the above

Which of the following is not an acceptable method of dealing with bad debts? The allowance method The percentage of credit sales method The direct write-off method The ageing of accounts method

A sales discount is A reduction in price to increase sales A reduction in price to encourage quick payment Disguised interest Both (B) and (C)

X Co. sells equipment A for 6 annual payments of $ 12,000 X Co. sells equipment A for 6 annual payments of $ 12,000. How much sales revenue should X Co. recognize, if X Co. wants to earn 8%? (end of year payments)

X Co. sells equipment B with a Fair market value of $ 53,200 for 4 annual payments of $ 15,000. A. How much sales revenue should X Co. recognize? B. What is X Co. required rate of return?

X Co. sells equipment C in exchange for one payment of $50,000 to be received in three years. How much sales revenue should X Co. recognize, if it wants to earn 6%?

X Co. sells equipment D in exchange for one payment of $50,000 plus 2% interest on the outstanding balance. The total (principal and interest are due in two years. A. How much sales revenue should X Co. recognize, if it wants to earn 8%? B. Record interest income for year 1 C. Record interest income for year 2

Exercise 15: How much cash is received from factored accounts?

Exercise 17: A. How much cash is received from factored accounts. B Exercise 17: A. How much cash is received from factored accounts? B. What is the loss from sale of receivables C. How much is due from factor?

Answers: C E D $55,475 A: $53,200 B: 5% $41,981 A. $44,599 $160,000 $3,567 $3,853 $160,000 A. $283,500 $4,500 $12,000