Question 1

An aging schedule is prepared only for old accounts receivables that have been past due for more than one year.

Accepted Answer

A) True 
 B)False  False

Question 2

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record estimated uncollectible accounts

Accepted Answer

A)   is relevant when using the percentage of receivables basis.
B)   is relevant when using the direct write-off basis.
C)   is relevant to both bases of adjusting for uncollectible accounts.
D)   will never show a debit balance at this stage in the accounting cycle. A

Question 3

Notes or accounts receivables that result from sales transactions are often called

Accepted Answer

A)   sales receivables.
B)   non-trade receivables.
C)   trade receivables.
D)   merchandise receivables. C

Question 4

If a retailer regularly sells its receivables to a factor, the service charge of the factor should be classified as a(n)

Accepted Answer

A)   selling expense.
B)   interest expense.
C)   other expense.
D)   contra asset.

Question 5

In recording the sale of accounts receivable, the commission charged by a factor is recorded as

Accepted Answer

A)   Bad Debt Expense.
B)   Commission Expense.
C)   Loss on Sale of Receivables.
D)   Service Charge Expense.

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.

Question 7

Seaver Books, a small book publishing company, wrote off the debt of The Learning Center, and the Academy of Basic Education, both small private schools, after it determined that the schools were facing serious financial difficulty. No notice of the action was sent to the schools; Seaver Books simply stopped sending bills. Nearly a year later, The Learning Center was given a large endowment and a government grant. The resulting publicity brought the school to the attention of Seaver Books, which immediately reinstated the account, and sent a new bill to the school, including interest for the entire time the debt was outstanding. No further action was taken regarding the Academy of Basic Education, which was still operational.
Required:
Did Seaver Books act ethically in reinstating the debt of one client, and not the other? Explain.

Accepted Answer

The answer of Seaver Books, a small book publishing company,...

Question 8

Two methods can be used in accounting for uncollectible accounts. Identify and contrast the two methods. How do the methods differ regarding the time periods in which Bad Debt Expense is recognized?
1. The use of bank credit cards increases sales. Many people want to use credit cards to make purchases. If a company does not offer this service, customers will buy from a competitor that does offer the services.

Accepted Answer

The answer of Two methods can be used in accounting...

Question 9

Which of the following would be considered as an unlikely occurrence?

Accepted Answer

A)   Manufacturer offers a cash discount to a wholesaler.
B)   Wholesaler offers a cash discount to a retailer.
C)   Retailer offers a cash discount to a customer.
D)   All of these answers are correct.

Question 10

An aging of a company's accounts receivable indicates that $14,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a

Accepted Answer

A)   debit to Bad Debt Expense for $14,000.
B)   debit to Allowance for Doubtful Accounts for $12,900.
C)   debit to Bad Debt Expense for $12,900.
D)   credit to Allowance for Doubtful Accounts for $14,000.

Question 11

A company that receives an interest bearing note receivable will

Accepted Answer

A)   debit Notes Receivable for the maturity value of the note.
B)   credit Notes Receivable for the maturity value of the note.
C)   debit Notes Receivable for the face value of the note.
D)   credit Notes Receivable for the face value of the note.

Question 12

Schwartzman Co., makes a credit card sale to a customer for $800. The credit card sale has a grace period of 30 days and then an interest charge of 1.5% per month is added to the balance. If the unpaid balance on the above sale is $640 at the end of the grace period, the interest charge is

Accepted Answer

A)   $6.40.
B)   $9.60.
C)   $11.00.
D)   $16.00.

Question 13

Under the direct write-off method of accounting for uncollectible accounts

Accepted Answer

A)   the allowance account is increased for the actual amount of bad debt at the time of write-off.
B)   a specific account receivable is decreased for the actual amount of bad debt at the time of write-off.
C)   balance sheet relationships are emphasized.
D)   bad debt expense is always recorded in the period in which the revenue was recorded.

Question 14

The existing balance in Allowance for Doubtful Accounts is considered in computing bad debt expense in the

Accepted Answer

A)   direct write-off method.
B)   percentage of receivables basis.
C)   percentage of receivables basis and direct write-off method.
D)   None of these choices are correct.

Question 15

The two methods of accounting for uncollectible accounts are the ____________ method and the ______________ method.

Accepted Answer

The answer of The two methods of accounting for uncollectible...

Question 16

When an account is written off using the allowance method, accounts receivable

Accepted Answer

A)   is unchanged and the allowance account increases.
B)   increases and the allowance account increases.
C)   decreases and the allowance account decreases.
D)   decreases and the allowance account increases.

Question 17

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.

Question 18

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.

Question 19

Record the following transactions for Adcock Company.
1. On April 12, sold $11,000 of merchandise to Milton Inc., terms 2/10, n/30.
2. On April 15, Milton returned $2,000 of merchandise.
3. On April 22, Milton paid for the merchandise.

Accepted Answer

The answer of Record the following transactions for Adcock Company.
1....

Question 20

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.

Exam 8: Accounting for Receivables