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National Defense University
Principles of Accounting
Semester 3
Assignment 6
Marks: 15 (3.75 each)
Date:29th April 2019
Student needs to attempt all questions.

QUESTION 1
Many commercials include comments similar to the following: “We accept VISA” or “We do
not accept credit cards.” Conduct your own research by contacting at least five companies via
interviews, phone calls, or the Internet to determine the reason(s) companies discriminate in their
use of credit cards. Collect information on the fees charged by the different cards for the companies
contacted.

Question 2
1. A company’s Accounts Receivable balance at its December 31 year-end is $125,650, and
its Allowance for Doubtful Accounts has a credit balance of $328 before year-end
adjustment. Its net sales are $572,300. It estimates that 4% of outstanding accounts
receivable are uncollectible. What amount of bad debts expense is recorded
at December 31?
a. $5,354
b. $328
c. $5,026
d. $4,698
e. $34,338

2. A company’s Accounts Receivable balance at its December 31 year-end is $489,300, and

its Allowance for Doubtful Accounts has a debit balance of $554 before year-end
adjustment. Its net sales are $1,300,000. It estimates that 6% of outstanding accounts
receivable are uncollectible. What amount of bad debts expense is recorded at December
31?
a. $29,912
b. $28,804
c. $78,000
d. $29,358
e. $554

3. The matching principle, as applied to bad debts, requires:

A. That expenses be ignored if their effect on the financial statements is unimportant to users'
business decisions.
B. The use of the direct write-off method for bad debts.
C. The use of the allowance method of accounting for bad debts.
D. That bad debts be disclosed in the financial statements.
E. That bad debts not be written off.

4. The materiality constraint, as applied to bad debts:

A. Permits the use of the direct write-off method when bad debts expenses are relatively small.
B. Requires use of the allowance method for bad debts.
C. Requires use of the direct write-off method.
D. Requires that bad debts not be written off.
E. Requires that expenses be reported in the same period as the sales they helped produce.

Question 3
1. Refer to the financial statements and notes of Apple in Appendix A. In its presentation of
accounts receivable on the balance sheet, how does it title accounts receivable? What does
it report for its allowance as of September 28, 2013?
2. Refer to the balance sheet of Google in Appendix A. Does it use the direct write-off
method or allowance method in accounting for its accounts receivable? What is the
realizable value of its receivables balance as of December 31, 2013?
3. Refer to the financial statements of Samsung in Appendix A. What does Samsung title its
accounts receivable on its consolidated balance sheet? What are Samsung’s accounts
receivable at December 31, 2013?
4. Refer to the December 31, 2013, financial statements of Samsung in Appendix A. Does
Samsung report its accounts receivable as a current or noncurrent asset? Does Samsung
report its GOOGLE accounts receivable net of an allowance
Question 4

Required
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following
independent assumptions.
a. Bad debts are estimated to be 1.5% of credit sales.
b. Bad debts are estimated to be 1% of total sales.
c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31,
2015, balance sheet given the facts in part 1a.
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31,
2015, balance sheet given the facts in part 1c.