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1. Pac, Capital is $1,000 on Jan 1, 20xx. The company had credit sales of $90,000; cash collections of accounts receivable of $80,000; cost of goods sold of $30,000; operating expenses of 20,000; a gain of $10,000; owner withdrawals of $4,000 and owner investments of $1,000 during the year. Determine the December 31, 20xx balance of Pac, Capital.

a. $74,000 c. $128,000

b. $48,000 d. $ 55,000

2. REM, Inc. had assets of $44 and liabilities of $18 on January 1. During the year, assets increased $10 and liabilities decreased $9. Calculate the December 31 balance of owners equity.

a. $45 c. $62

b. $55 d. $35

3. James Taylor Co. has Accounts Receivable of $200,000 at February 28, 20xx. The Allowance for Bad Debts has a $6,000 credit balance. The company has aged the receivables and $50,000 have not reached the due date, $80,000 are between one and sixty days past the due and $70,000 are over sixty-one days past the due date. Estimate how much of the receivables are uncollectible and the amount of bad debt expense for the period assuming 3% of the not yet due receivables are bad; 8% of the between 1-60 day receivables are worthless and 20% of the receivables older than 61 days are worthless.

a. $15,900 and $6,000 c. $21,900 and $15,900

b. $6,000 and $21,900 d. None of the above

4. Terps Co. has $200,000 of accounts Receivable as of January 1, 20xx. During the current year, credit sales amounted to $500,000; cash collections of credit sales were $450,000 and sales returns were $20,000. The unadjusted credit balance of the allowance for bad debts account is $10,000 at December 31. Management estimates that six and a half percent of net credit sales are uncollectible. How much bad debt expense should the company report on the income statement?

a. $18,500 c. $12,500

b. $16,500 d. None of the above

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