chapter 5 accounting

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

note receivable

a formal, signed credit agreement between a lender and a borrower is called a ____ by the lender

notes receivable

when merchandise is returned for a refund or for credit to be appealed to other purchases, the situation is called

sales return

The allowance method estimates

uncollectible accounts

The direct write-off method is required for

income tax purposes

companies extend credit to customers and sell goods on account because

it increases sales

an aging schedule classifies accounts receivable based on

length of time outstanding

The percentage of receivables method of estimating bad debt applies ____to ___

A single percentage; accounts receivable

The income statement approach for estimating bad debts focuses on

Current year's credit sales

A trade discount is a reduction from a list price, which is used to:

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

under the allowance method companies estimate ____ uncollectible accounts and report those estimates in the ____year

future; current

using a percentage of each period's net credit sales to estimate bad debt expense is a ____ ____ approach to measuring bad debts

income statement

assume that company x is in the fifth year of operation analyze the following schedule what conclusion will be drawn from the following schedule

The target amount in allowance for uncollectible accounts is $25,500

The account "allowance for uncollectible accounts" Is classified as

contra asset to accounts receivable

Joyce Corp. uses the percentage-of-credit-sales method to account for bad debt expense. Joyce determines that a customer account of $20,000 should be written off as uncollectible. The write off of the account will include which of the following entries?

debit to allowance for uncollectible counts and credit to accounts receivable

The percentage of receivables approached to measuring bad debt expense is referred to as ___ method

a balance sheet

The allowance for uncollectible accounts is a contra account to

accounts receivable

The amount of cash owed to a company by its customers from the sale of goods or services is referred to as

accounts receivable

The allowance method is required by ____

GAAP

for accounts receivable the longer an account is outstanding

More likely it will prove uncollectible.

A trade discount is

a percentage reduction from list price

The approach that considers the age of various accounts receivables to estimate uncollectible accounts as referred to as the _____ method of accounts receivable

aging

to record an estimate for future bad debts at the end of the period and adjustment would be made with a credit to

allowance for uncollectible accounts

a company that expects that some of its customers will not pay the agreed upon sales price must utilize the

allowance method

which method of accounting requires estimated bad debt expense and recording the expense in the same period as the related revenue?

allowance method

accounts receivable should be classified as a

asset

The formula to compute the receivables turnover ratio is net credit sales divided by

average accounts receivable

The journal entry to record bad debit expense includes

credit to allowance for uncollectible accounts and debit to bad debt expense

a disadvantage to selling on account is

customers do not always pay

Shannon Corp. uses the aging method to account for bad debt expense. Shannon determines that a customer account of $10,000 should be written off as uncollectible. The write off of the account will include

debit allowance for uncollectible accounts

Ophelia ink just learned that patent ink one of its customers with an outstanding accounts receivable balance filed for bankruptcy. assuming that the company utilizes the allowance method, Ophelia should record a

decrease in accounts receivable

The accounts receivable account is reduced when the seller

determines that a specific customer account will not be collectible

Mark records a journal entry with a debit to bad debt expense in a credit to accounts receivable Mark is utilizing the

direct write-off method

which method of accounting requires recognizing bad debt expense when it is determined that the customer cannot pay

direct write-off method

The _____ ratio shows the number of times during a year that the average receivable balance is collected

receivables turnover

when a customer returns a product for a refund, in which account is the entry recorded

sales return

accounts receivable are typically classified as current assets because

they will be converted to cash within one year

a(n) ______ ______ Is the legal right to receive cash from a credit sale and represents an asset of the company

trade receivable

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

uncollectible

The direct write-off method is used when

uncollectible accounts are not anticipated or are immaterial

when the direct write-off method is used an entry for bad debt expense is required

when the account receivable is determined to be uncollectible

the receivables turnover ratio indicates

The number of times during a year that the average accounts receivables were collected.

A customer account that does not expect it to be collected is referred to as ____ debt

bad

The cost of estimated accounts receivable will not be collected is referred to as _____ ______ expense

bad debt

estimated expense for accounts that may not be collected as referred to as

bad debt expense

with the direct write-off method, the journal entry to write off a uncollectible account includes the debit to ______ and a credit to _____

bad debt expense; accounts receivable

compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to

be more accurate