Question 1

If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.

Accepted Answer

A) True 
 B)False

Question 2

When a note is written to settle an open account, no entry is necessary.

Accepted Answer

A) True 
 B)False

Question 3

At the end of the current year, Accounts Receivable has a balance of $750,000; Allowance for Doubtful Accounts has a debit balance of $6,200; and net sales for the year total $3,500,000. Bad debt expense is estimated at 1/2 of 1% of net sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

Accepted Answer

The answer of At the end of the current year,...

Question 4

At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000. Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance of Doubtful Accounts, respectively.

Accepted Answer

A)  $19,500 and $25,000 
B)  $30,500 and $525,000 
C)  $19,500 and $525,000 
D)  $30,500 and $25,000 
A)  $19,500 and $25,000 
B)  $30,500 and $525,000 
C)  $19,500 and $525,000 
D)  $30,500 and $25,000

Question 5

Receivables that are expected to be collected in cash in eighteen months or less are reported in the Current Asset section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 6

Lone Star Company received a 90-day, 6% note for $80,000, dated March 12 from a customer on account. (Assume a 360-day year when calculating interest.)

Accepted Answer

@#IMG-DLM&_TB2013_00

Question 7

What is the type of account and normal balance of Allowance for Doubtful Accounts?

Accepted Answer

A)  Contra asset, credit 
B)  Asset, debit 
C)  Asset, credit 
D)  Contra asset, debit 
A)  Contra asset, credit 
B)  Asset, debit 
C)  Asset, credit 
D)  Contra asset, debit

Question 8

At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $2,000. The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be uncollectible is $15,000. The amount to be recorded in the adjusting entry for the bad debt expense is $15,000.

Accepted Answer

A) True 
 B)False

Question 9

Interest on a note can be calculated without knowledge of the

Accepted Answer

A)  fair value of the note 
B)  rate of interest 
C)  notes duration 
D)  principal amount 
A)  fair value of the note 
B)  rate of interest 
C)  notes duration 
D)  principal amount

Question 10

One of the weaknesses of the direct write-off method is that it

Accepted Answer

A)  understates accounts receivable on the balance sheet 
B)  violates the matching principle 
C)  is too difficult to use for many companies 
D)  is based on estimates 
A)  understates accounts receivable on the balance sheet 
B)  violates the matching principle 
C)  is too difficult to use for many companies 
D)  is based on estimates

Question 11

Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts to estimate the amount of uncollectible accounts of $41,900. Which of the following adjusting entries would be made to record the Bad Debt Expense for the year?

Accepted Answer

A)  debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600 
B)  debit Allowance for Doubtful Accounts $43,200; credit Bad Debt Expense, $43,200 
C)  debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200 
D)  debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600 
A)  debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600 
B)  debit Allowance for Doubtful Accounts $43,200; credit Bad Debt Expense, $43,200 
C)  debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200 
D)  debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600

Question 12

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?

Accepted Answer

A)  Uncollectible Accounts Expense 
B)  Accounts Receivable 
C)  Allowance for Doubtful Accounts 
D)  Interest Expense 
A)  Uncollectible Accounts Expense 
B)  Accounts Receivable 
C)  Allowance for Doubtful Accounts 
D)  Interest Expense

Question 13

The direct write-off method of accounting for uncollectible accounts

Accepted Answer

A)  emphasizes balance sheet relationships. 
B)  is often used by small companies and companies with few receivables. 
C)  emphasizes cash realizable value. 
D)  emphasizes the matching of expenses with revenues. 
A)  emphasizes balance sheet relationships. 
B)  is often used by small companies and companies with few receivables. 
C)  emphasizes cash realizable value. 
D)  emphasizes the matching of expenses with revenues.

Question 14

Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year (before adjustment), and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $800,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts is

Accepted Answer

A)  $29,500 
B)  $34,500 
C)  $32,000 
D)  cannot be determined 
A)  $29,500 
B)  $34,500 
C)  $32,000 
D)  cannot be determined

Question 15

At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000. Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting entry for bad debt expense and the adjusted balance Allowance of Doubtful Accounts.)

Accepted Answer

A)  $550,000 
B)  $544,500 
C)  $525,000 
D)  $575,000 
A)  $550,000 
B)  $544,500 
C)  $525,000 
D)  $575,000

Question 16

To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a

Accepted Answer

A)  debit to Bad Debs Expense and a credit to Allowance for Doubtful Accounts. 
B)  debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. 
C)  debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. 
D)  debit to Loss on Credit Sales and a credit to Accounts Receivable. 
A)  debit to Bad Debs Expense and a credit to Allowance for Doubtful Accounts. 
B)  debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. 
C)  debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. 
D)  debit to Loss on Credit Sales and a credit to Accounts Receivable.

Question 17

A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of the note is

Accepted Answer

A)  $6,860 
B)  $7,140 
C)  $7,840 
D)  $7,000 
A)  $6,860 
B)  $7,140 
C)  $7,840 
D)  $7,000

Question 18

The amount of a promissory note is called the

Accepted Answer

A)  realizable value 
B)  maturity value 
C)  face value 
D)  proceeds 
A)  realizable value 
B)  maturity value 
C)  face value 
D)  proceeds

Question 19

When a note is received from a customer on account, it is recorded by debiting Notes Receivable and crediting Accounts Receivable.

Accepted Answer

A) True 
 B)False

Question 20

An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals $7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt expense for the period will require a

Accepted Answer

A)  debit to Bad Debt Expense for $8,600. 
B)  debit to Bad Debt Expense for $7,900. 
C)  debit to Bad Debt Expense for $7,200. 
D)  credit to Allowance for Doubtful Accounts for $700. 
A)  debit to Bad Debt Expense for $8,600. 
B)  debit to Bad Debt Expense for $7,900. 
C)  debit to Bad Debt Expense for $7,200. 
D)  credit to Allowance for Doubtful Accounts for $700.

Exam 9: Receivables

If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.

When a note is written to settle an open account, no entry is necessary.

Receivables that are expected to be collected in cash in eighteen months or less are reported in the Current Asset section of the balance sheet.

Lone Star Company received a 90-day, 6% note for $80,000, dated March 12 from a customer on account. (Assume a 360-day year when calculating interest.)

What is the type of account and normal balance of Allowance for Doubtful Accounts?

Interest on a note can be calculated without knowledge of the

One of the weaknesses of the direct write-off method is that it

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?

The direct write-off method of accounting for uncollectible accounts

Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year (before adjustment), and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $800,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts is

To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a

A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of the note is

The amount of a promissory note is called the

When a note is received from a customer on account, it is recorded by debiting Notes Receivable and crediting Accounts Receivable.

An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals $7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt expense for the period will require a

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

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