ACCT 2113 Test 2

prime company has an ending balance in the accounts receivable account of $100,000. prime recorded bad debt expense of $3000. prime has an ending balance in the allowance for uncollectible accounts of $7000. what is the nrv of accounts receivable?

$93000

A trade discount is a reduction from the list price, which is used to: (4)

- disguise real prices from competitors - give quantity discounts to customers - change prices without publishing a new catalog

most closely approximates the actual physical flow of inventory

FIFO

a formal credit arrangement between a creditor and a debtor is called

a note receivable

two entries are required when a previously written off account is paid. these two entries include:

reinstate the account receivable record the collection on the account receivable

a company had $4,000 in deferred revenue at the end of 2017. the $4,000 is

reported as a liability

redbud paid $1,000 in shipping costs to have inventory delivered to its warehouse. when the $1,000 was paid, redbud debited ______

retained earnings

when dividends are paid, which of the following changes?

retained earnings decrease

what type of payment tends to increase sales and profitability in the long-run?

sales on account

a company makes a sale on terms 2/10, n/30. what does that mean?

the customer may take a 2% discount off the price if paid within 10 days if the discount is not taken in 10 days, the net amount is due within 30 days

accounts receivable are classified as current assets because

they will be converted to cash within 1 year or the normal operating cycle

a company may use more than one inventory cost method

true

a customer account that is not expected to be collected is referred to as a bad debt or _____ account

uncollectible

in a perpetual inventory system the inventory account is adjusted (2)

when inventory is purchased when inventory is sold

the ______ value of accounts receivable is the amount of cash a company expects to collect

net realizable

the percentage-of-receivables approach to measuring bad debt expense focuses on

net realizable value of accounts receivable

a _____ is the exclusive right to manufacture a product or use a process granted for a period of twenty years

patent

which accounts are typically reported in the balance sheet of a manufacturing company?

raw materials work in process finished goods

a claim to receive cash in the future is a ______

receivable

why would a company let customers buy on credit?

increase sales (makes flow of commercial transactions easier)

A calendar-year-end company that accepts a 3-month interest-bearing note on December 1 must accrue_______ revenue on December 31

interest

accounts receivable are amounts

invested in the company by stockholders

provides better matching of current revenues with current inventory cost

LIFO

difference between total accounts and the allowance for uncollectible accounts is referred to as

NRV net accounts receivable

which of the following is an expense?

accumulated depreciation

which of the following items are initially recorded as an expense on the income statement?

advertising costs research and development costs internally developed intangibles

the first step in using the percentage-of-receivables approach to estimate bad debt is to calculate the desired ending balance in which account?

allowance for uncollectible accounts

accounts receivable are

amounts owed to a company by customers for products or services provided in the normal course of business

when an account previously written off is collected in full, which entry is required to ensure that accounting for the complete payment history of the customer?

an entry to reinstate the account receivable and an entry to record payment

raven receives a 3-year note receivable from a customer for goods sold. how should raven report this note receivable in its financial statement?

as a noncurrent asset

generally, costs that provide future benefits are recorded as

assets

bad debt expense is the difference between

balance and total estimated uncollectible accounts

a _____ is an exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book

copyright

the account "allowance for uncollectible accounts" normally has a _______ balance

credit

sales to customers in which the customers pay within 30 to 60 days are referred to as (2)

credit sales sales on account

a _____ balance before adjustment indicates that the estimate of uncollectible accounts at the beginning of the year may have been too low

debit

company uses the perpetual inventory system. when company purchases inventory on account, the entry will include which of the following?

debit inventory

contra revenue

decrease with liability (credit) increase with debit

the allowance method is a method of accounting that _____ net accounts receivable (as well as net income) for estimated bad debts

decreases the method reduces, not increases, net accounts receivable by the account of estimated bad debts

the accounts receivable account is reduced when the seller

determines that a specific customer account will not be collectible

gwen uses the allowance method to account for uncollectible receivables. gwen should record_______ bad debt expense _______

estimated at the end of the year

merchandising companies purchase inventory in ______ form whereas manufacturing firms _____ the goods

finished produce

which of the following may be classified as non-operating expenses and revenues for a company that manufactures televisions? (3)

gain from sale of land interest revenue interest expense

bad debt expense is reported on the _________ and classified as an _________

income statement operating expense