Alpine Company reported an increase of S190.000 in its accounts receivable durin

Question

Alpine Company reported an increase of S190.000 in its accounts receivable during the year 2005. The company's statement of cash flows for 2005 reported SI million of cash 20. received from customers. What amount of net sales must Alpine have recorded in 2005? A) S 810,000. B) $1,190,000. C) $1,000,000. D) S 190,000 21. When there is an allowance for doubtful accounts in use, the writing-off of an unco A) Reduce income. B) Reduce an expense Not change income nor total assets. D) Increase total assets. 22. The aging of the accounts receivable approach to estimating uncollectible accounts does not: A) Take into consideration the existing balance in the Allowance for Doubtful Accounts. B) Utilize a percentage of probable uncollectible accounts for each age group of accounts receivable Stress the relationship between uncollectible accounts expense and net sales. C) D) Tend to give a reliable estimate of uncollectible accounts because of the consideration given to the collectibility of specific accounts receivable. Juliet Inc. had accounts receivable of $300,000 and an allowance for doubtful accounts of $18,500 just of $1,200. The net realizable values of the accounts receivable before and after the write- off were: A) $281,500 before and $280,300 after B) $281,500 before and $281,500 after. C) $300,000 before and $298,800 after. D) $318,500 before and $317,300 after. 23. before writing off as worthless an account receivable from Arrow Company Romeo Inc. had accounts receivable of $250,000 and an allowance for doubtful accounts of $9,700 just before writing off as worthless an account receivable from Juliet Compan of $1,500. After writing off this receivable what would be the balance in Romeo's Allowance for Doubtful Accounts? A) $9,700 credit balance B) $10,900 credit balance. C) S8,200 credit balance D) $8,200 debit balance. 24.

Explanation / Answer

20) The correct option in this question is B (i.e.$1,190,000) which is calculated as follows:-

21) The correct option is C. When there is an allowance for doubtful accounts in use, the writing off of an uncollectible receivable will not change income nor total assets because in this case Allowance for Doubtful debts is debited and Accounts Receivable is credited resulted in set off of both increase and decrease.

22) The correct option is C. The aging of the Accounts Receivable approach to estimating uncollectible accounts does not stress the relationship between uncollectible expense and net sales as in the aging approach, relationship between allowance for doubtful accounts and age of debtors is considered for estimating allowance for doubtful accounts.

23) The option B is correct as there will be no change in net balance of accounts receivable due to writing off accounts receivable when there is allowance for accounts receivable in use. The Net realizable value before write off is $281,500 ($300,000-$18,500). The net realizable value after write off is also $281,500 [($300,000-$1,200)-($18,500-$1,200)].

Increase in Accounts Receivable balance during 2005 $190,000 Add: Cash Received from Debtors $1,000,000 Net Sales for 2005 $1,190,000

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