Question 1

Writing off an uncollectible account under the allowance method requires a debit to

Accepted Answer

A)  Accounts Receivable. 
B)  Allowance for Doubtful Accounts. 
C)  Bad Debts Expense. 
D)  Uncollectible Accounts Expense. 
A)  Accounts Receivable. 
B)  Allowance for Doubtful Accounts. 
C)  Bad Debts Expense. 
D)  Uncollectible Accounts Expense. B

Question 2

The interest on a $5,000, 10%, 1-year note receivable is

Accepted Answer

A)  $5,000. 
B)  $500. 
C)  $5,050. 
D)  $5,500. 
A)  $5,000. 
B)  $500. 
C)  $5,050. 
D)  $5,500. B

Question 3

Using the following information:   During 2010, sales on account were $145,000 and collections on account were $86,000. Also during 2010, the company wrote off $8,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that uncollectible accounts should be estimated at $54,000.
The change in the cash realizable value from the balance at 12/31/09 to 12/31/10 was a

Accepted Answer

A)  $50,000 increase. 
B)  $59,000 increase. 
C)  $42,000 increase. 
D)  $51,000 increase. 
A)  $50,000 increase. 
B)  $59,000 increase. 
C)  $42,000 increase. 
D)  $51,000 increase. C

Question 4

Fowler Company on July 15 sells merchandise on account to Coffey Co. for $1,000, terms 2/10, n/30. On July 20 Coffey Co. returns merchandise worth $400 to Fowler Company. On July 24 payment is received from Coffey Co. for the balance due. What is the amount of cash received?

Accepted Answer

A)  $600 
B)  $588 
C)  $580 
D)  $1,000 
A)  $600 
B)  $588 
C)  $580 
D)  $1,000

Question 5

On March 1, 2010, Joe Miles purchased a suit at Calvin's Fine Apparel Store. The suit cost $250 and Joe used his Calvin credit card. Calvin charges 2% per month interest if payment on credit charges is not made within 30 days. On April 30, 2010, Joe had not yet made his payment. What entry should Calvin make on April 30th?

Accepted Answer

The answer of On March 1, 2010, Joe Miles purchased...

Question 6

The direct write-off method

Accepted Answer

A)  is acceptable for financial reporting purposes. 
B)  debits Allowance for Doubtful Accounts to record write-offs of accounts. 
C)  shows only actual losses from uncollectible accounts receivable. 
D)  estimates bad debt losses. 
A)  is acceptable for financial reporting purposes. 
B)  debits Allowance for Doubtful Accounts to record write-offs of accounts. 
C)  shows only actual losses from uncollectible accounts receivable. 
D)  estimates bad debt losses.

Question 7

Bad Debts Expense is reported on the income statement as

Accepted Answer

A)  part of cost of goods sold. 
B)  reducing gross profit. 
C)  an operating expense. 
D)  a contra-revenue account. 
A)  part of cost of goods sold. 
B)  reducing gross profit. 
C)  an operating expense. 
D)  a contra-revenue account.

Question 8

If an account is collected after having been previously written off,

Accepted Answer

A)  the allowance account should be debited. 
B)  only the control account needs to be credited. 
C)  both income statement and balance sheet accounts will be affected. 
D)  there will be both a debit and a credit to accounts receivable. 
A)  the allowance account should be debited. 
B)  only the control account needs to be credited. 
C)  both income statement and balance sheet accounts will be affected. 
D)  there will be both a debit and a credit to accounts receivable.

Question 9

The maturity value of a $30,000, 8%, 3-month note receivable is

Accepted Answer

A)  $30,600. 
B)  $30,240. 
C)  $32,400. 
D)  $30,200. 
A)  $30,600. 
B)  $30,240. 
C)  $32,400. 
D)  $30,200.

Question 10

Sales resulting from the use of Visa and MasterCard are considered credit sales by the retailer.

Accepted Answer

A) True 
 B)False

Question 11

The term "receivables" refers to

Accepted Answer

A)  amounts due from individuals or companies. 
B)  merchandise to be collected from individuals or companies. 
C)  cash to be paid to creditors. 
D)  cash to be paid to debtors. 
A)  amounts due from individuals or companies. 
B)  merchandise to be collected from individuals or companies. 
C)  cash to be paid to creditors. 
D)  cash to be paid to debtors.

Question 12

When a note is accepted to settle an open account, Notes Receivable is debited for the note's

Accepted Answer

A)  net realizable value. 
B)  maturity value. 
C)  face value. 
D)  face value plus interest. 
A)  net realizable value. 
B)  maturity value. 
C)  face value. 
D)  face value plus interest.

Question 13

Short-term notes receivables

Accepted Answer

A)  have a related allowance account called Allowance for Doubtful Notes Receivable. 
B)  are reported at their gross realizable value. 
C)  use the same estimations and computations as accounts receivable to determine cash realizable value. 
D)  present the same valuation problems as long-term notes receivables. 
A)  have a related allowance account called Allowance for Doubtful Notes Receivable. 
B)  are reported at their gross realizable value. 
C)  use the same estimations and computations as accounts receivable to determine cash realizable value. 
D)  present the same valuation problems as long-term notes receivables.

Question 14

Three accounting issues associated with accounts receivable are

Accepted Answer

A)  depreciating, returns, and valuing. 
B)  depreciating, valuing, and collecting. 
C)  recognizing, valuing, and disposing. 
D)  accrual, bad debts, and disposing. 
A)  depreciating, returns, and valuing. 
B)  depreciating, valuing, and collecting. 
C)  recognizing, valuing, and disposing. 
D)  accrual, bad debts, and disposing.

Question 15

A note is dishonored when it is not fully paid at maturity.

Accepted Answer

A) True 
 B)False

Question 16

At December 31, 2010, Grayson Company reported Accounts Receivable of $34,000 and Allowance for Doubtful Accounts of $3,500. On January 7, 2011, Duffy Enterprises declares bankruptcy and it is determined that the receivable of $1,200 from Duffy is not collectible.
1. What is the cash realizable value of Accounts Receivable at December 31, 2010?
2. What entry would Grayson make to write off the Duffy account?
3. What is the cash realizable value of Accounts Receivable after the Duffy account is written off?

Accepted Answer

1. Cash realizable value = $34

Question 17

Receivables may be sold because they may be the only reasonable source of cash.

Accepted Answer

A) True 
 B)False

Question 18

Nolte Products is undecided about which base to use in estimating uncollectible accounts. On December 31, 2010, the balance in Accounts Receivable was $680,000 and net credit sales amounted to $3,500,000 during 2010. An aging analysis of the accounts receivable indicated that $36,000 in accounts are expected to be uncollectible. Past experience has shown that about 1% of net credit sales eventually are uncollectible.
Instructions
Prepare the adjusting entries to record estimated bad debts expense using the (1) percentage of sales basis and (2) the percentage of receivables basis under each of the following independent assumptions:
(a) Allowance for Doubtful Accounts has a credit balance of $3,200 before adjustment.
(b) Allowance for Doubtful Accounts has a debit balance of $730 before adjustment.

Accepted Answer

(1) Percentage of sales basis:

Question 19

A company has net credit sales of $900,000 for the year and it estimates that uncollectible accounts will be 2% of sales. If Allowance for Doubtful Accounts has a credit balance of $1,000 prior to adjustment, its balance after adjustment will be a credit of

Accepted Answer

A)  $18,000. 
B)  $19,000. 
C)  $17,980. 
D)  $17,000. 
A)  $18,000. 
B)  $19,000. 
C)  $17,980. 
D)  $17,000.

Question 20

Two methods of accounting for uncollectible accounts are the

Accepted Answer

A)  allowance method and the accrual method. 
B)  allowance method and the net realizable method. 
C)  direct write-off method and the accrual method. 
D)  direct write-off method and the allowance method. 
A)  allowance method and the accrual method. 
B)  allowance method and the net realizable method. 
C)  direct write-off method and the accrual method. 
D)  direct write-off method and the allowance method.

Exam 9: Accounting for Receivables

Writing off an uncollectible account under the allowance method requires a debit to

The interest on a $5,000, 10%, 1-year note receivable is

Fowler Company on July 15 sells merchandise on account to Coffey Co. for $1,000, terms 2/10, n/30. On July 20 Coffey Co. returns merchandise worth $400 to Fowler Company. On July 24 payment is received from Coffey Co. for the balance due. What is the amount of cash received?

The direct write-off method

Bad Debts Expense is reported on the income statement as

If an account is collected after having been previously written off,

The maturity value of a $30,000, 8%, 3-month note receivable is

Sales resulting from the use of Visa and MasterCard are considered credit sales by the retailer.

The term "receivables" refers to

When a note is accepted to settle an open account, Notes Receivable is debited for the note's

Short-term notes receivables

Three accounting issues associated with accounts receivable are

A note is dishonored when it is not fully paid at maturity.

Receivables may be sold because they may be the only reasonable source of cash.

A company has net credit sales of $900,000 for the year and it estimates that uncollectible accounts will be 2% of sales. If Allowance for Doubtful Accounts has a credit balance of $1,000 prior to adjustment, its balance after adjustment will be a credit of

Two methods of accounting for uncollectible accounts are the

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

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