Accounting Chapter 6 SmartBook

Brewed Awakenings, Inc., sold $100,000 of coffee to Java the Hut with sales terms of 1/7, n/30. Given Java paid within the discount period, the amount of the sales discount equals $________

$1,000

Libby Inc. sells $5,000 of goods to a customer. The customer pays with a VISA credit card. VISA charges a 3% fee on the sale. Recording the sale would include a debit to Cash of ______

$4,850

An analyst sees the line item Trade accounts receivable, net of allowances of $2,040,000, with a balance of $19,500,000. Which of the following statements is correct

$21,540,000 is the gross receivables $2,040,000 is the amount estimated to be uncollectible $19,500,000 is the expected amount to be collected from customers

Cellar's Inc. sold $800,000 of merchandise with sales terms of 2/10, n/30 and the customers paid within 10 days. The net sales equals ______.

$784,000 (= $800,000 Sales - ($800,000 x 2% discount))

During the month, Cellum, Inc. sold 100 cells at a price of $100 each. Each cell was sold at a 1% sales discount. Cellum had returns of $198 (net of discounts) and incurred bank service charges of $20. Net sales for the month ended equals

9,702(100 x 100) - (10,000 x .01) - 198The 20 is an expense, not a contra revenue account

Accounts receivable, net on the balance sheet refers to ______

Accounts Receivable minus the Allowance for Uncollectible Accounts

Which of the following are contra-asset accounts?

Allowance for doubtful accounts Accumulated depreciation

What conclusion are managers likely to draw from a constant increase to sales returns and allowances?

Customers are unhappy with the quality of the merchandise

Accounts receivable has a $2,300 balance, and the Allowance for doubtful accounts has a $200 credit balance. An $80 account receivable is written off. The net book value of receivables on the balance sheet after the write-off equals _____

Net receivables = ($2,300 - 80) - (200 - 80) = $2,100

When a customer returns a product for a refund, in which of the seller's accounts is the entry recorded?

Sales Returns and Allowances

Who normally pays for shipping when the shipping terms are FOB destination?

Seller

The line item Trade accounts receivable, net of allowances will be found on the ______

balance sheet

Using the aging approach, management estimates that $1,000 of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a ______

credit to Allowance for Doubtful Accounts of $900 debit to Bad Debt Expense of $900

The entry to record the collection of $9,600 from a customer whose account had previously been written off includes a ______

credit to Allowance for doubtful accounts of $9,600

The Allowance for Doubtful Accounts is a contra-asset account. Increases to the account (to record the period's estimated bad debt expense) are recorded with ______

credits

A customer that was written off now pays. The journal entry recorded to reverse this previously written-off amount is recorded as a ______

debit Accounts receivable and credit Allowance for doubtful accounts

Since accounting numbers, such as the allowance for doubtful accounts balance, are based on ___________ , financial statements are susceptible to management manipulation

estimates

When the allowance method is used, the write-off of an uncollectible account ______

has no effect on net income

Bad Debt Expense ______

is an estimate is a cost of extending credit to customers

Given the unadjusted Allowance for Doubtful Accounts has a $50 credit balance, the amount of receivables written off was ______ than the amount estimated in the prior period. This will cause Bad Debt Expense to be ______ in the current period than had the unadjusted balance been a debit or $0 unadjusted balance

less; less

The ____________ of credit sales is the method that estimates bad debt expense using credit sales and the _________ of accounts receivable method estimates the allowance for doubtful accounts based on the time each account receivable has been outstanding.

percentage; aging

On January 1, goods were picked up by a FedUp Delivery, Inc. The goods arrived at the customer's place of business on January 12. If the seller recorded the sale on January 1, then the terms must have been FOB ______

shipping point