Accounting Ch.7

Conroy Company uses the allowance method to account for bad debts. During 2010, Conroy determined that a balance of $200 for Alegia Co. was uncollectible and wrote the balance off. What is the total decrease to net income related to this entry?

$0

On August 21, Alix Company receives a $2,000, 60-day, 6% note from a customer as payment on her account. How much interest will be due on October 20—the due date?

$20

Lani Co. uses the allowance method to account for bad debts. At the end of the year their unadjusted trial balance shows an accounts receivable balance of $400,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,200,000. Based on history, Lani estimates that bad debts will be 1% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: Multiple choice question.

$4,400

Leo Co. uses the allowance method to account for bad debts. At the end of the year, Leo Co.'s accounts receivable balance is $25,000; allowance for doubtful accounts balance of $100 (credit); and sales of $500,000. Based on history, Leo estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: Multiple choice question.

$400

Yates Co. uses the allowance method to account for bad debts. At the end of the period, Yate's unadjusted trial balance shows an accounts receivable balance of $10,000; allowance for doubtful accounts balance of $400 (credit); and sales of $500,000. Based on history, Yates estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of: Multiple choice question.

$5,000

On June 30, Nance Company receives a $5,000, 90-day, 4% note from a customer as payment on her account. How much interest will be due on the note's maturity date? Multiple choice question.

$50

Ana Co. uses the allowance method to account for bad debts. At the end of the period, Ana's unadjusted trial balance shows an accounts receivable balance of $40,000; allowance for doubtful accounts balance of $300 (credit); and sales of $500,000. Based on history, Ana estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of:

$500

Finish Co. uses the allowance method to account for bad debts. At the end of the year, Finish Co.'s unadjusted trial balance shows an accounts receivable balance of $30,000; allowance for doubtful accounts balance of $200 (debit balance); and sales of $600,000. Based on history, Finish estimates that bad debts will be 1% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: Multiple choice question.

$500

Finish Co. uses the allowance method to account for bad debts. At the end of 2010, Finish Co.'s unadjusted trial balance shows an accounts receivable balance of $30,000; allowance for doubtful accounts balance of $200 (credit); and sales of $600,000. Based on history, Finish estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: Multiple choice question.

$6,000

Leo Co. uses the allowance method to account for bad debts. At the end of the year, Leo Co.'s accounts receivable balance is $25,000; allowance for doubtful accounts balance of $100 (debit balance); and sales of $500,000. Based on history, Leo estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:

$600

Flash Co. uses the allowance method to account for bad debts. At the end of 2010, Flash Co.'s unadjusted trial balance shows an accounts receivable balance of $45,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,500,000. Based on history, Flash estimates that bad debts will be 0.5% of sales. The entry to record estimated bad debts will include an debit to Bad Debts Expense in the amount of: Multiple choice question.

$7,500

1. Promissory note 2. Principal 3. Interest 4. Maker 5. Payee 6. Maturity date

1. Written promise to pay a specified amount of money 2. Amount that the signer agrees to pay back, not including interest 3. Choice Charge from using money loaned from one entity to another 4. One who signed the note and promised to pay at maturity 5. Choice The person to whom the note is payable 6. Day that the principal and interest must be paid

Net sales for a company are $250,000. Average accounts receivable are $10,000. The accounts receivable turnover for this company is

25

Ace Company sells merchandise to a customer in the amount of $200 on credit, terms n/30. The entry to record this sale would include a debit to the ____________ account:

Accounts Receivable

To record a sale on account, the company should debit:

Accounts Receivable.

At year-end, Avis Company estimates that $2,000 of its accounts receivable balance is uncollectible. Avis uses the allowance method to account for bad debts. The entry to record this adjusting entry would include a credit to: Multiple choice question.

Allowance for Doubtful Accounts

On December 31, Lee Company estimates that $1,000 of its accounts receivable balance is uncollectible. Lee Company uses the allowance method to account for bad debts. The adjusting entry to record this estimate will include a credit to:

Allowance for Doubtful Accounts

A 60-day note is signed on February 15 (and it's not leap year). The due date of the note is:

April 16

(Bad/Invalid)(collectible/debts) are accounts of customers who do not pay what they have promised to pay. It's considered an expense of selling on credit.

Blank 1: Bad Blank 2: Debts

The two most common receivables are receivables and receivables.

Blank 1: accounts or account Blank 2: notes or note

The direct write-off method records bad debts expense only when an account becomes uncollectible, which is not always in the same period as the sale. For this reason, the direct write-off method might violate the principle.

Blank 1: expense or matching Blank 2: recognition

The (maker/signer) of the note is the one that signed the note and promised to pay at maturity. The (maker/payee)of the note is the person to whom the note is payable.

Blank 1: maker Blank 2: payee

To compute interest due on a maturity date, multiply (principal/note) times (interest/dividends) times time expressed in fraction of year.

Blank 1: principal or principle Blank 2: interest rate or interest

Acel Co. uses the allowance method to account for bad debts. Early in 2010, Acel determined that it could not collect $400 from CTR, Inc. and wrote the balance off. On October 21, Acel received a check for $400 from CTR. The entries to record the receipt of cash on October 21 would include a debit to: Select two answers.

Cash. Accounts Receivable.

Acel Co. uses the allowance method to account for bad debts. Early in 2010, Acel determined that it could not collect $400 from CTR, Inc. and wrote the balance off. On October 21, Acel received a check for $400 from CTR. The entries to record the receipt of cash on October 21 would include a debit to: Select two answers. Multiple select question.

Cash. Accounts Receivable.

Iron Company collects cash in full from a customer who purchased merchandise last month on credit. To record the receipt of cash, Iron Company should make the following entries in the general journal. (Check all that apply.)

Debit to Cash Credit to Accounts Receivable

True or false: The allowance method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts.

False

True or false: The direct write-off method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

False

A 90-day note is signed on October 21. The due date of the note is: Multiple choice question.

January 19

The advantages of using the allowance method to account for bad debts include which of the following? (Check all that apply.)

Matches expenses with related sales Reports accounts receivable balance at net realizable value

DonCo, Inc. sold merchandise on January 14, and accepted a 90-day, 5% promissory note in the amount of $5,000. On January 14, the entry to record this transaction would include a debit to: Multiple choice question.

Notes Receivable in the amount of $5,000

To compute interest due on a maturity date, you should multiply which of the following factors? (Check all that apply.)

Time expressed in fraction of year Interest rate Principal

True or false: Accounts receivable are amounts due from customers for credit sales.

True

The asset account that tracks "amounts due from customers for credit sales" is commonly called: Multiple choice question.

accounts receivable

When a company makes a sale on credit, it records the amount due from the customer in ____________.

accounts receivable

A(n) ____________ is a supplementary record created to maintain a separate account for each customer.

accounts receivable ledger

The ________ ratio is a measure of both the quality and liquidity of accounts receivable; it indicates how often, on average, receivables are received and collected during the period.

accounts receivable turnover

The ___________ of accounts receivable method uses several percentages to estimate the allowance.

aging

The __________ method, also referred to as balance sheet method, uses balance sheet relations to estimate bad debts—mainly, the relationship between accounts receivable and the allowance account.

aging of accounts receivable

The __________ method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date.

aging of receivables

The (allowance/direct write-off) method of accounting for bad debts matches the estimated loss from uncollectible accounts receivables against the sales they helped produce.

allowance

The (allowance/direct write-off)__________method of accounting for bad debts matches the estimated loss from uncollectible accounts receivables against the sales they helped produce.

allowance

Bad debts are:

an expense of selling on credit. also called uncollectible accounts. accounts of customers who do not pay.

The allowance for doubtful accounts is a(n) (current/contra/opposite) asset account and has a normal credit balance.

contra

In September, DK Company sells merchandise to Lions Company on credit. In October, Lions Company pays the balance in full. The entry to record the collection of cash by DK Company in October will include a (debit/credit) to Accounts Receivable.

credit

Lina Co. uses the allowance method to account for bad debts. On January 28, Lina determines that a $200 balance from ZRT, Inc. is uncollectible and writes the balance off. The journal entry to write this balance off will include a: (Check all that apply.)

credit to Accounts Receivable - ZRT. debit to Allowance for Doubtful Accounts.

On November 1, Eli Co. received a $6,000, 60-day, 6% note from a customer as payment on his $6,000 account. Eli's journal entry to record this transaction on November 1, would include a: (Check all that apply.) Multiple select question.

credit to Accounts Receivable for $6,000. debit to Notes Receivable for $6,000.

On December 31, DVS Company estimates that $2,500 of its accounts receivable balance is uncollectible. DVS uses the allowance method to account for bad debts. The entry to record this adjusting entry would include a: (Check all that apply.)

credit to Allowance for Doubtful Accounts for $2,500. debit to Bad Debts Expense for $2,500.

Tunes Company determines that a customer balance of $250 from Able Co. is uncollectible. Tunes uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a (debit/credit) to the Allowance for Doubtful Accounts.

debit

Zino Company determines that a customer balance of $200,from Hollis Co. is uncollectible. Zino uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a:

debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.

The ____________ method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense.

direct write-off

The direct write-off method records bad debts expense only when an account becomes uncollectible, which is not always in the same period as the sale. For this reason, the direct write-off method may not follow the __________ principle.

expense recognition

An accounts receivable ledger: (Check all that apply.)

is a supplementary record to maintain an account for each customer. records journal entries that affect accounts receivable.

Accounts receivable turnover is calculated using the following formula: Multiple choice question.

net sales/average accounts receivable

The ________ method of estimating allowance for doubtful accounts is based on the idea that a given percent of a company's credit sales for the period are uncollectible. Multiple choice question.

percentage of sales

To compute interest due on a maturity date, use the formula:

principal x interest rate x time expressed in fraction of year

The expected proceeds from accounts receivable, determined by taking accounts receivable less the allowance for doubtful accounts, is called:

realizable value

A _________________ is an amount due from another party. Multiple choice question.

receivable

When an account previously written off is later collected, two journal entries are required. The first journal entry is to _____ the account, and the second journal entry is to record _____ of payment.

reinstate, receipt

Companies allow customers to pay for products using third-party credit cards because: (Check all that apply.)

the seller does not have to evaluate customer credit. the seller avoids the risk of customer non-payment. a variety of payment options typically increase sales volume. cash is received from the credit card company faster than from a credit customer.

The allowance for doubtful accounts is a contra asset account that equals:

total uncollectible accounts

The allowance for doubtful accounts is a contra asset account that equals: Multiple choice question.

total uncollectible accounts