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Exam 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash

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Question 71

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A company had the following partial list of account balances at year-end: $\begin{array}{lr}\text { Sales Returns and Allowances } & \$ 1,000 \\\text { Accounts Receivable } & 38,000 \\\text { Sales Discounts } & 2,100 \\\text { Sales Revenue } & 95,000 \\\text { Allowance for Doubtful Accounts } & 1,200\end{array}$ How much is net sales revenue?

A) $91,900.
B) $90,700.
C) $89,900.
D) $88,600.

E) A) and B)
F) A) and C)

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Question 72

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Effective internal control of cash should include the separation of the duties for receiving and disbursing cash.

A) True
B) False

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Question 73

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The year-end journal entry to record bad debt expense reduces the accounts receivable account and increases net income.

The allowance for doubtful accounts is reported as a contra-asset on the balance sheet.

Which of the following statements correctly describes the effect of recording the collection of a $10,000 account receivable for which a 2% sales discount was recorded at the time of collection?

The year-end journal entry to record bad debt expense reduces current assets and net income.

Upon completing an aging analysis of accounts receivable, the accountant for Rosco Works prepared and aging of accounts receivable and estimated that $5,000 of the $98,000 accounts receivable balance would be uncollectible. The allowance for doubtful accounts had a $400 debit balance at year-end prior to adjustment. How much is bad debt expense?

Which of the following correctly describes the effect of a journal entry involving the recording of a sales return?