Question 1

Under the allowance method,the entry to write off a receivable increases the amount of the Allowance for Bad Debts account.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is the result of the maker of a promissory note failing to pay the note on the due date?

Accepted Answer

A)  a discounted note 
B)  a depreciated note 
C)  an amortized note 
D)  a dishonored note 
A)  a discounted note 
B)  a depreciated note 
C)  an amortized note 
D)  a dishonored note

Question 3

If a note receivable is outstanding at the end of an accounting period,the interest earned up to year-end is recorded as interest revenue when the cash is received.

Accepted Answer

A) True 
 B)False

Question 4

A receivable occurs when a business sells goods or services to another party on account.

Accepted Answer

A) True 
 B)False

Question 5

A receivable occurs when a business ________.

Accepted Answer

A)  loans money to another party 
B)  sells goods or services to another party on account 
C)  has a monetary claim against a business or individual 
D)  All of the statements are correct. 
A)  loans money to another party 
B)  sells goods or services to another party on account 
C)  has a monetary claim against a business or individual 
D)  All of the statements are correct.

Question 6

Trendy Calendars is a new business.During its first year of operations,credit sales were $40,000,and collections of credit sales were $36,000.One account,$650,was written off.Using the aging-of-receivables method,management calculates $200 as its estimate of uncollectible amounts at year end.Prepare the journal entry to record bad debts expense.Omit explanation.

Accepted Answer

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Question 7

A business maintains subsidiary accounts for each of its customers.On April 7,the business provides $2,500 in services to Anne Hill on account.The business sells $4,000 (sales price)of merchandise inventory to Ron Wilson on account.
The full amount was collected from each customer on April 26.
Prepare the journal entries for April 7 and April 26.Ignore Cost of Goods Sold and omit explanations.
 $$\begin{array} { | l | l | l | l | } 
\hline \text { Date } &\quad\quad\quad\quad\quad\quad\quad\quad & \text { Debit } & \text { Credit } \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | r | r | } 
\

Question 8

The Allowance for Bad Debts account has a credit balance of $8000 before the adjusting entry for bad debts expense.After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of-receivables method,the company's management estimates that uncollectible accounts will be $15,000.What will be the balance of the Allowance for Bad Debts reported on the balance sheet?

Accepted Answer

A)  $15,000 
B)  $7000 
C)  $23,000 
D)  $13,500 
A)  $15,000 
B)  $7000 
C)  $23,000 
D)  $13,500

Question 9

Some companies promote and issue their own private label credit cards.

Accepted Answer

A) True 
 B)False

Question 10

After a company has written off an account,the company continues to attempt to collect on the receivable.

Accepted Answer

A) True 
 B)False

Question 11

Specialty Foods Company maintains a separate accounts receivable account for each customer.Regarding this accounting treatment,which of the following statements is incorrect?

Accepted Answer

A)  The separate customer accounts receivable are called subsidiary accounts. 
B)  When a customer makes a payment on account, a debit is posted to the accounts receivable subsidiary account as well as to the accounts receivable control account. 
C)  The sum of all balances in the subsidiary accounts receivable equals a control account balance. 
D)  The purpose of this accounting treatment is to account for payments received from the customer and the amounts still owed. 
A)  The separate customer accounts receivable are called subsidiary accounts. 
B)  When a customer makes a payment on account, a debit is posted to the accounts receivable subsidiary account as well as to the accounts receivable control account. 
C)  The sum of all balances in the subsidiary accounts receivable equals a control account balance. 
D)  The purpose of this accounting treatment is to account for payments received from the customer and the amounts still owed.

Question 12

Prepare the journal entry to record an uncollectible account receivable of $10,000,using the direct write-off method.Omit explanation.

Accepted Answer

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Question 13

The collection period of accounts receivable is usually long,and therefore,it is classified as a long-term asset on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 14

Credit cards reduce the customer's bank account immediately but allow the customer to pay electronically instead of with currency or writing a check.

Accepted Answer

A) True 
 B)False

Question 15

Notes receivable due within 12 months or within the normal operating cycle if the cycle is longer than a year are considered long-term assets.

Accepted Answer

A) True 
 B)False

Question 16

On July 1,2019,Landscape Equipment Sellers accepted a 3-month,15% note for $6,000 in settlement of an overdue account receivable.Prepare the journal entry to record the acceptance of the note.Omit explanation.

Accepted Answer

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Question 17

Define net realizable value.How is net realizable value affected when a receivable is written off under the allowance method?

Accepted Answer

Net realizable value is the net value a

Question 18

Bad debt expense is a cost to the seller of extending credit.

Accepted Answer

A) True 
 B)False

Question 19

The following information is from the 2019 records of Fast Lane Racing Gear: $$\begin{array} { | l | l | } 
\hline \text { Accounts receivable, December 31, 2019 } & \$ 40,000 \text { (debit) } \
\hline \text { Allowance for Bad Debts, December 31,2019 prior to adjustment } & 2000 \text { (debit) } \
\hline \text { Net credit sales for 2019 } & 175,000 \
\hline \text { Accounts written off as uncollectible during 2019 } & 18,000 \
\hline \text { Cash sales during 2019 } & 30,000 \
\hline
\end{array}$$ Bad debts expense is estimated by the aging-of-receivables method.Management estimates that $9000 of accounts receivable will be uncollectible.Calculate the ending balance of Allowance for Bad Debts,after the adjustment for bad debts expense,at December 31,2019.

Accepted Answer

A)  $5250 
B)  $13,000 
C)  $8000 
D)  $9000 
A)  $5250 
B)  $13,000 
C)  $8000 
D)  $9000

Question 20

A company with significant amounts of accounts receivable experiences uncollectible accounts from time to time.If the company uses the direct write-off method,the effect of writing off an uncollectible receivable will be ________.

Accepted Answer

A)  a reduction in net income 
B)  negligible on net income 
C)  an increase in total assets 
D)  a generation of positive cash flow 
A)  a reduction in net income 
B)  negligible on net income 
C)  an increase in total assets 
D)  a generation of positive cash flow

Exam 9: Receivables

Under the allowance method,the entry to write off a receivable increases the amount of the Allowance for Bad Debts account.

Which of the following is the result of the maker of a promissory note failing to pay the note on the due date?

If a note receivable is outstanding at the end of an accounting period,the interest earned up to year-end is recorded as interest revenue when the cash is received.

A receivable occurs when a business sells goods or services to another party on account.

A receivable occurs when a business ________.

Some companies promote and issue their own private label credit cards.

After a company has written off an account,the company continues to attempt to collect on the receivable.

Specialty Foods Company maintains a separate accounts receivable account for each customer.Regarding this accounting treatment,which of the following statements is incorrect?

Prepare the journal entry to record an uncollectible account receivable of $10,000,using the direct write-off method.Omit explanation.

The collection period of accounts receivable is usually long,and therefore,it is classified as a long-term asset on the balance sheet.

Credit cards reduce the customer's bank account immediately but allow the customer to pay electronically instead of with currency or writing a check.

Notes receivable due within 12 months or within the normal operating cycle if the cycle is longer than a year are considered long-term assets.

On July 1,2019,Landscape Equipment Sellers accepted a 3-month,15% note for $6,000 in settlement of an overdue account receivable.Prepare the journal entry to record the acceptance of the note.Omit explanation.

Define net realizable value.How is net realizable value affected when a receivable is written off under the allowance method?

Bad debt expense is a cost to the seller of extending credit.

A company with significant amounts of accounts receivable experiences uncollectible accounts from time to time.If the company uses the direct write-off method,the effect of writing off an uncollectible receivable will be ________.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

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