F4 - Working Capital and Its Components

Question 1

What is the journal entry to write off uncollectible accounts?

Answer 1

Allowance for Doubtful Accounts XXX

Accounts Receivable XXX

Question 2

When the allowance method of recognizing uncollectible accounts is used, how would the collection of an account previously written off affect accounts receivable and the allowance for uncollectible accounts?

Answer 2

Accounts receivable - No effect; Allowance for uncollectible accounts - Increase

Question 3

How is current ratio calculated?

Answer 3

Current assets / current liabilities

Question 4

How is quick ratio calculated?

Answer 4

(Cash + Net receivables + Marketable securities) / current liabilities

Question 5

How are overdrafts in bank accounts treated?

Answer 5

If there is an offsetting positive account at the same bank, it is netted; if it is a separate bank, it is listed as a current liability