2 MCQ:
1. Companies often have a high ratio of cash to noncash assets when they consistently pay
dividends.
True or False
ANSWER: FALSE
Dividends represent the return of cash to stockholders and therefore reduce the balance of cash.
2. Which of the following sales would typically be reported as a cash sale?
A. Sale in exchange for office supplies received.
B. Sale in exchange for equipment received.
C. Sale on account.
D. Sale with credit card.
1 Short Question:
On 31 December 2021, before Hira Company can produce any year-end adjustments, it must
estimate the amount of uncollectible accounts receivable for the coming year. The following balances
were showing on the company’s unadjusted trial balance:
Unadjusted Trial Balance (extract)
31 December 2021
Accounts receivable
Allowance for uncollectible accounts
$Dr
$Cr
197,000
2,015
Hira Company also prepares the following ageing schedule for Accounts Receivables:
Description
Not yet due
1-30 days past due
31-90 days past due
> than 90 days past due
Total accounts receivable
Amount $
165,000
14,600
3,000
14,400
197,000
Expected
loss %
1%
10%
12%
65%
Additional transaction:
-
Received payment from Pear Company of $2,000 cash. The original invoice amount was
$4,800 but was written off as a bad debt in the beginning of the year.
Question: Prepare the adjusting journal entry to record the above Allowance for Uncollectible
Accounts Receivable for the year
(Hint: Necessary journals to account for the above transaction and then calculate estimated
uncollectible accounts receivable amount for the coming year before preparing the adjusting journal
entry)