Chapter 5 - Receivables and Sales

To record an estimate for future bad debts at the end of the period, an adjustment would be made with a credit to sales returns and allowances. allowance for uncollectible accounts. bad debt expense. accounts receivable.

allowance for uncollectible accounts.

Under the allowance method, companies estimate _____ uncollectible amounts and report those estimates in the _____ year. future; future future; current current; current current; future

future; current

Use the information below to calculate net revenues. Service Revenue $ 100,000 Sales Discounts $ 2,000 Accounts Receivable $ 15,000 Sales Allowances $ 7,000 Cash $ 18,000 Multiple Choice $91,000. $85,000. $68,000. $98,000.

91,000

The effect of writing off a specific account receivable is: Multiple Choice A reduction in the Allowance for Uncollectible Accounts. An increase in the amount of Accounts Receivable. An increase in the amount of Bad Debt Expense. An increase in the Allowance for Uncollectible Accounts.

A reduction in the Allowance for Uncollectible Accounts

A sales discount is recorded by the seller as a(n): Multiple Choice Expense. Contra asset. Contra revenue. Liability.

Contra revenue.

Using the allowance method, the effect on the current year's financial statements of writing off an account receivable generally is to 1. Decrease total assets. 2. Decrease net income. Multiple Choice I only II only I and II Neither I nor II

Neither I nor II

Which of the following transactions would result in an account receivable? Multiple Choice Providing services to customers on account. Paying for supplies previously purchased on account. Receiving a loan from the bank. Purchasing supplies on account.

Providing services to customers on account.

Recording bad debt expense: (Select all that apply.) increases net income increases expenses decreases net income increases assets decreases expenses decreases assets

increases expenses decreases net income decreases assets

A formal, signed credit agreement between a lender and a borrower is called a(n) _____ by the lender. account payable. note receivable. note payable. account receivable.

note receivable.

Sales to customers in which the customers pay within 30 to 60 days are referred to as (Select all that apply.) nonaccrued sales. deferred sales. sales on account. credit sales.

sales on account. credit sales.

Glasser Corp. provided $20,000 of services on account. The account that should be credited is accounts payable. accounts receivable. service revenue. cash.

service revenue.

high ratio of allowance for uncollectible accounts to total accounts receivable can indicate: (Select all that apply.) the company's customers are high-risk stringent credit policies the company extends too much credit the company should extend additional credit

the company's customers are high-risk the company extends too much credit

On September 1, Bates Supplies borrows $30,000 from Vines Incorporated by signing an 8% note due in 12 months. Calculate the amount of interest revenue Vines will record on December 31, four months after the note is issued. Multiple Choice $0. $800. $1,600. $2,400.

$800.

On March 5, Oak Corp. provided services on account to Pine. Oak initially recorded this as an account receivable but it later became apparent Pine could not pay quickly so Oak required Pine to sign a $100,000, 12%, 2-month interest-bearing note. The journal entry required by Oak when Pine signs the note includes Debit Notes Receivable $100,000; credit Accounts Receivable $100,000. Debit Notes Receivable $100,000; credit Service Revenue $100,000. Debit Notes Receivable $102,000; credit Service Revenue $102,000. Debit Notes Receivable $102,000; credit Accounts Receivable $102,000.

Debit Notes Receivable $100,000; credit Accounts Receivable $100,000.

On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a debit of $500 and that the company estimates 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be: Multiple Choice $5,000. $5,100. $5,600. $6,100.

$6,100.

On March 17, Fox Lumber sells materials to Whitney Construction for $12,000, terms 2/10, n/30. Whitney pays for the materials on March 23. What amount would Fox record as revenue on March 17? Multiple Choice $12,400. $11,760. $12,000. $12,240.

$12,000.

Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad debt expense of $1,000. Tudor has an ending balance in the allowance for uncollectible accounts of $2,000. What is the net accounts receivable balance? $17,000 $18,000 $20,000 $19,000

$18,000

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). Assuming Nelson Inc. has a December 31 year-end, on March 31, 20X2, Nelson Inc. will record interest revenue of: Multiple Choice $8,000. $6,000. $2,000. $0.

$2,000.

On August 4, Sanders provides services to Frederickson for $5,000, terms 3/10, n/30. Frederickson pays for the services on August 12. What amount would Sanders record as revenue on August 4? Multiple Choice $4,850. $5,000. $5,150. $5,300.

$5,000

On January 1, 2021, Nees Manufacturing lends $10,000 to Roberson Supply using a 9% note due in eight months. Calculate the amount of interest revenue Nees will record on September 1, 2021, the date that the note is due. rev: 03_20_2019_QC_CS-163432 Multiple Choice $300. $600. $900. $1,000.

$600.

A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 debit The company estimates future uncollectible accounts to be 4% of accounts receivable. At what amount would Bad Debt Expense be reported in the current year's income statement? Multiple Choice $400. $2,800. $3,200. $3,600.

3,600

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). On December 31, 20X1, Nelsen will accrue interest revenue of: Multiple Choice $8,000. $6,000. $2,000. $0.

6,000

When a company provides services on account, which of the following accounts is debited? Multiple Choice Service Revenue. Accounts Payable. Accounts Receivable. Cash.

Accounts Receivable.

Which method of accounting requires estimating bad debt expense and recording the expense in the same period as the related revenue? Allowance method Return method Direct write-off method

Allowance method

Accounts receivable are best described as Multiple Choice Liabilities of the company that represent the amount owed to suppliers. Amounts that have previously been received from customers. Assets of the company representing the amount owed by customers. Amounts that have previously been paid to suppliers.

Assets of the company representing the amount owed by customers.

The cost of estimated accounts receivable that will not be collected is referred to as ________ _________ expense.

Bad debt

On January 18, a company provides services to a customer for $500 and offers the customer terms 2/10, n/30. Which of the following would be recorded when the customer remits payment on January 25? Multiple Choice Debit Cash for $500. Credit Accounts Receivable for $490. Credit Service Revenue for $500. Debit Sales Discount for $10.

Debit Sales Discount for $10.

Adrian Corp. sells goods on account for $100,000 on May 1. On May 15, the customer returns $40,000 of the merchandise. The customer has not yet paid for any of the goods. What will Adrian record on May 15? (Select all that apply.) Debit to Sales Expense. Credit to Allowance for Sales Returns. Debit to Sales Returns. Credit to Accounts Receivable.

Debit to Sales Returns. Credit to Accounts Receivable.

Which method of accounting requires recognizing bad debt expense when it is determined that the customer cannot pay? Percentage-of-credit sales method Direct write-off method Allowance method Return method

Direct write-off method

A trade discount is a percentage reduction from list price. a percentage reduction of the amount due for early payment. an increase in the account receivable. a rebate from the manufacturer.

a percentage reduction from list price.

Flounder Corp. provided $12,000 of services on account. The entry to record this transaction would include a debit to accounts receivable. sales. accounts payable. retained earnings.

accounts receivable.

The amount of cash owed to a company by its customers from the sale of goods or services is referred to as a guarantee. accounts payable. uncollectible accounts. accounts receivable.

accounts receivable.

The estimated expense for accounts that may not be collected is referred to as accounts receivable. bad debt expense. amortization expense. interest expense. sales discounts.

bad debt expense.

A trade discount is a reduction from the list price, which is used to: (Select all that apply.) change prices without publishing a new catalog encourage customers to pay quickly give quantity discounts to customers reduce the sale price for interest received disguise real prices from competitors

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

If the allowance for uncollectible accounts is 25% of year-end accounts receivable, this might indicate customers are taking the sales discount. credit policies are too lenient. the company has tightened credit policies. customers have returned excessive amounts of merchandise.

credit policies are too lenient.

When a business provides services to a customer, and the customer promises to pay later, this is referred to as credit sales. cash sales. operating sales. current sale.

credit sales.

The journal entry to record bad debt expense includes: (Select all that apply.) credit to allowance for uncollectible accounts debit to bad debt expense debit to allowance for uncollectible accounts credit to bad debt expense

credit to allowance for uncollectible accounts debit to bad debt expense

hannon 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 Accounts Receivable. debit Bad Debt Expense. credit Sales Returns and Allowances. debit Allowance for Uncollectible Accounts.

debit Allowance for Uncollectible Accounts.

Prime Corp. has an ending balance in the accounts receivable account of $100,000. Prime recorded bad debt expense of $3,000. Prime has an ending balance in the allowance for uncollectible accounts of $7,000. What is the net accounts receivable balance? $90,000 $107,000 $93,000 $97,000

$93,000

On November 1, year 1, ABC, Inc., received a 3-month, 8%, $1,500 note receivable with interest and principal to be collected on February 1 of year 2. What is the amount of interest revenue that should be recorded for year 1? $120 $60 $30 $20 $80

$20

A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 credit The company estimates 1% of credit sales will be uncollectible. At what amount would Allowance for Uncollectible Accounts be reported in the current year's balance sheet? Multiple Choice $4,000. $4,400. $3,600. $800.

$4,400.

Schmidt Company's Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net realizable value of accounts receivable is: Multiple Choice $96,000. $96,200. $100,000. $104,000.

$96,000.

The allowance method estimates sales discounts. trade discounts. uncollectible accounts. future sales.

uncollectible accounts.