Acct Final

Which of the following is the typical sequence of accounting for sales made on account using the allowance method?

Accounts Receivable are debted in the period the revanue is recogzized bad debt expense is estimated and recorded with an adjusting entry specifc customer balances are written off

In financial statements, Sales on account will cause an increase in ______.

Accounts Receivable on the balance sheet Sales Revenue on the income statement

Which method of allowing for estimated uncollectible accounts is generally more accurate?

Aging of accounts receivable method

Which of the following is a permanent account whereby the ending balance of the prior accounting period equals its beginning balance of the next.

Allowance for Doubtful Accounts

Which of the following are contra-asset accounts? (Check all that apply.)

Allowance for Doubtful Accounts Accumulated Depreciation

Using its aging of accounts receivable, Age Old, Inc. estimates that $90,000 of its $4,000,000 of accounts receivable will be uncollectible. Prior to making its adjusting entry, the unadjusted Allowance for Doubtful Accounts has a debit balance of $1,000. After the adjustment, the ______.

Allowance for Doubtful Accounts will have a $90,000 credit balance

Which of the following is recorded at the end of an accounting period when accounting for receivables using the allowance method?

An estimate is recorded by debiting Bad Debt Expense and crediting Allowance for Doubtful Account in the same period as the related sale.

What would be the effect of forgetting to record the adjusting entry for estimated bad debts?

Assets and stockholders' equity would be overstated.

Murphy's Paw, Inc. has credit sales of $100,000 for the month ended May 31. The Accounts Receivable balance is $8,000. Management estimates that 1% of its credit sales will be uncollectible. This adjusting entry includes a debit to ______.

Bad Debt Expense and credit to Allowance for Doubtful Accounts for $1,000

Using the allowance method, which is the correct adjusting journal entry to record bad debt expense?

Debit Bad Debt Expense and credit Allowance for Doubtful Accounts

True or false: The adjusting entry to record Bad Debt Expense includes a credit to Accounts Receivable.

F

Which method requires estimating the amount of the Bad Debt Expense and then determining the balance in the Allowance for Doubtful Accounts which will differ from the expense if there is an unadjusted balance?

Percentage of credit sales method

GAAP require end-of-period adjustments for the estimated bad debts in the period of the credit sale even though the specific, non-paying customers have not yet been identified.

T

Which account is used to reduce assets for the amount of estimated bad debts?

The contra-asset account called Allowance for Doubtful Accounts

During the year, ABC Corp. realizes that a particular customer will never pay. What action should ABC take?

Write off the uncollectible account and its corresponding allowance from the accounting records.

Removing an uncollectible account and its corresponding allowance from the accounting records is called ______.

a write-off

Accounts Receivable represent ______.

amounts owed to a business by its customers

Using the allowance method, Bad Debt Expense is recorded _____.

as an estimate in the period of the related credit sales

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

The journal entry to record $5.6 million in sales on account includes a ______

debit to Accounts Receivable of $5.6 million credit to Sales Revenue of $5.6 million

The adjusting entry to record the allowance for doubtful accounts includes a ______

debit to Bad Debt Expense credit to Allowance for Doubtful Account

The allowance method is a method of accounting that ______ for estimated bad debts.

decreases net accounts receivable

The accounting principle that governs the recording of bad debt expense in the same period as sales revenue is called the ______.

expense recognition (matching) principle

The 2 steps required using the allowance method, are to ______.

first make an end-of-period adjustment to record the estimated bad debts later write-off specific customer balances when they are known to be uncollectible

To be in accordance with GAAP, companies are required to estimate the amount of uncollectible receivables and make an adjusting entry. The effect of the adjusting entry is to ______.

reduce Net Income by debiting Bad Debt Expense and reduce net accounts receivable by crediting Allowance for Doubtful Accounts