Acct101 - ch8 questions

48. The direct write-off method of accounting for uncollectible accounts A. emphasizes balance sheet relationships. B. is often used by small companies and companies with few receivables. C. emphasizes cash realizable value. D. emphasizes the matching of expenses with revenues

b

52. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible? A. Uncollectible Accounts Expense B. Accounts Receivable C. Allowance for Doubtful Accounts D. Interest Expense

b

53. One of the weaknesses of the direct write-off method is that it A. understates accounts receivable on the balance sheet B. violates the matching principle C. is too difficult to use for many companies D. is based on estimates

b

103. Paper Company receives a $6,000, 3-month, 6% promissory note from Dame Company in settlement of an open accounts receivable. What entry will Paper Company make upon receiving the note? A. Notes Receivable 6,000 Accounts Receivable—Dame Company 6000 B. Notes Receivable 6,090 Accounts Receivable—Dame Company 6090 C. Notes Receivable 6,090 Accounts Receivable—Dame Company 6000 Interest Revenue 90 D. Notes Receivable 6,000 Interest Revenue 90 Accounts Receivable—Dame Company 6000 Interest Receivable 90

A

108. Accounts Receivable Turnover measures A. how frequently during the year the accounts receivable are converted to cash B. the number of days of accounts receivable outstanding C. the fair market value of accounts receivable D. the efficiency of the accounts payable function

A

109. The number of days' sales in receivables A. is an estimate of the length of time the receivables have been outstanding B. measures the number of times the receivables turn over each year C. is Net Credit Sales divided by Average Receivables D. is not meaningful and therefore is not used

A

110. Given the following information, compute Accounts Receivable Turnover: Gross Sales: $150,000 Accounts Receivable, Beginning of Year: $18,000 Net Sales: $135,000 Accounts Receivable, End of Year: $22,000 A. 6.75 B. 7.5 C. 6.13 D. 6.82

A

111. At the end of the current year, Accounts Receivable has a balance of $550,000 Allowance for Doubtful Accounts has a credit balance of $5,500 and net sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000. Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance of Doubtful Accounts, respectively. A. $19,500 and $25,000 B. $30,500 and $525,000 C. $19,500 and $525,000 D. $30,500 and $25,000

A

65. Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment? A. Bad Debt Expense 17,000 Allowance for Doubtful Accounts 17,000 B. Bad Debt Expense 19,500 Allowance for Doubtful Accounts 19,500 C. Bad Debt Expense 22,000 Allowance for Doubtful Accounts 22,000 D. Bad Debt Expense 65,000 Allowance for Doubtful Accounts 65,000

A

67. The balance in Allowance for Doubtful Accounts will directly impact the end of period adjustment for the bad debt expense when using which of the following methods? A. Allowance method B. Direct write-off method C. Accrual method D. declining value method

A

69. An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals $6,400. If Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad debt expense for the period will require a A. debit to Bad Debt Expense for $7,700. B. debit to Bad Debt Expense for $6,400. C. debit to Bad Debt expense for $5,100 D. credit to Allowance for Doubtful Accounts for $1,300

A

73. Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the year (before adjustment), and an analysis of customers' accounts indicates uncollectible receivables of $12,900. Which of the following entries records the proper adjustment for Bad Debt Expense? A. debit Bad Debt Expense, $14,000 credit Allowance for Doubtful Accounts, $14,000 B. debit Allowance for Doubtful Accounts, $14,000 credit Bad Debt Expense, $14,000 C. debit Allowance for Doubtful Accounts, $11,800 credit Bad Debt Expense, $11,800 D. debit Bad Debt Expense, $11,800 credit Allowance for Doubtful Accounts, $11,800

A

82. Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to be $31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year? A. debit Bad Debt Expense, $34,200 credit Allowance for Doubtful Accounts, $34,200 B. debit Allowance for Doubtful Accounts, $34,200 credit Bad Debt Expense, $34,200 C. debit Allowance for Doubtful Accounts, $29,600 credit Bad Debt Expense, $29,600 D. debit Bad Debt Expense, $29,600 credit Allowance for Doubtful Accounts, $29,600

A

96. Interest on a note can be calculated without knowledge of the A. fair value of the note B. rate of interest C. notes duration D. principal amount

A

99. The journal entry to record a note received from a customer to replace an account is A. debit Notes Receivable credit Accounts Receivable B. debit Accounts Receivable credit Notes Receivable C. debit Cash credit Notes Receivable D. debit Notes Receivable credit Notes Payable

A

102. When a company receives an interest-bearing note receivable, it will A. debit Notes Receivable for the maturity value of the note. B. debit Notes Receivable for the face value of the note. C. credit Notes Receivable for the maturity value of the note. D. credit Notes Receivable for the face value of the note.

B

104. The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is A. $40,000 B. $40,400 C. $43,600 D. $44,000

B

70. An aging of a company's accounts receivable indicates that estimate of the uncollectible accounts totals $4,000. If Allowance for Doubtful Accounts has a $800 credit balance, the adjustment to record the bad debt expense for the period will require a A. debit to Allowance for Doubtful Accounts for $3,200. B. debit to Bad Debt Expense for $3,200. C. debit to Allowance for Doubtful Accounts for $4,000. D. credit to Allowance for Doubtful Accounts for $4,000

B

79. Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of net credit sales will be uncollectible. On January 1, 2010, the Allowance for Doubtful Accounts had a credit balance of $2,400. During 2010, Abbott wrote-off accounts receivable totaling $1,800 and made credit sales of $100,000. There were no Sales Returns or Sales Discounts during the year. After the adjusting entry, the December 31, 2010, balance in the Bad Debt Expense would be A. $1,200 B. $3,000 C. $3,600 D. $7,200

B

84. Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment), and an analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts should be $16,000. Based on the estimate above, which of the following adjusting entries should be made? A. debit Bad Debt Expense, $800 credit Allowance for Doubtful Accounts, $800 B. debit Bad Debt Expense, $15,200 credit Allowance for Doubtful Accounts, $15,200 C. debit Allowance for Doubtful Accounts, $800 credit Bad Debt Expense, $800 D. debit Bad Debt Expense, $16,800 credit Allowance for Doubtful Accounts, $16,800

B

90. When a company uses the allowance method of accounting for uncollectible receivables, which entry would not be found in the general journal? A. Bad Debt Expense 500 Allowance for Doubtful Accounts 500 B. Bad Debt Expense 500 Accounts Receivable - Bob Smith 500 C. Cash 300 Allowance for Doubtful Accounts 200 Accounts Receivable - Bob Smith 500 D. Cash 500 Accounts Receivable - Bob Smith 500

B

93. The amount of the promissory note plus the interest earned on the due date is called the A. interest value B. maturity value C. face value D. issuance value

B

95. A 60-day, 9% note for $10,000, dated May 1, is received from a customer on account. The maturity value of the note is A. $10,000 B. $10,150 C. $10,900 D. $9,100

B

97. On October 1, Black Company receives a 9% interest bearing note from Reese Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Black should record interest revenue of A. $0 B. $450 C. $900 D. $1,800

B

105. Harper Company lends Hewell Company $40,000 on March 1, accepting a four-month, 6% interest note. Harper Company prepares financial statements on March 31. What adjusting entry should be made before the financial statements can be prepared? A. Cash 200 Interest Revenue 200 B. Interest Receivable 800 Interest Revenue 800 C. Interest Receivable 200 Interest Revenue 200 D. Note Receivable 40,000 Cash 40,000

C

106. On August 1, Kim Company accepted a 90-day note receivable as payment for services provided to Hsu Company. The terms of the note were $20,000 face value and 6% interest. On October 30, the journal entry to record the collection of the note should include a A. credit to Notes Receivable for $20,300 B. debit to Interest Receivable for $300 C. credit to Interest Revenue for $300 D. debit to Notes Receivable for $20,000

C

112. At the end of the current year, Accounts Receivable has a balance of $550,000 Allowance for Doubtful Accounts has a credit balance of $5,500 and net sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000. Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting entry for bad debt expense and the adjusted balance Allowance of Doubtful Accounts.) A. $550,000 B. $544,500 C. $525,000 D. $575,000

C

66. You have just received notice that a customer of yours with an Account Receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to A. debit Bad Debt Expense and credit Allowance for Doubtful Accounts. B. debit Bad Debt Expense and credit Accounts Receivable. C. debit Allowance for Doubtful Accounts and credit Accounts Receivable. D. debit Allowance for Doubtful Accounts and credit Bad Debt Expense

C

68. An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals $7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt expense for the period will require a A. debit to Bad Debt Expense for $8,600. B. debit to Bad Debt Expense for $7,900. C. debit to Bad Debt Expense for $7,200. D. credit to Allowance for Doubtful Accounts for $700

C

71. The collection of an account that had been previously written off under the allowance method of accounting for uncollectible A. will increase net income in the period it is collected. B. will decrease net income in the period it is collected. C. does not affect net income in the period it is collected. D. requires a correcting entry for the period in which the account was written off

C

77. Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has determined that the Irish Company account is uncollectible. To write-off this account, Dalton should debit A. Bad Debt Expense and credit Accounts Receivable B. Bad Debt Expense and credit Allowance for Doubtful Accounts C. Allowance for Doubtful Accounts and credit Accounts Receivable D. Accounts receivable and credit Allowance for Doubtful Accounts

C

78. In accounting for uncollectible receivables, the balance in Allowance for Doubtful Accounts will directly impact the amount of the adjustment when applying which method? A. direct write-off method B. percentage of sales method C. Analysis of receivables method D. both (b) and (c)

C

83. Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year (before adjustment), and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $800,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts is A. $29,500 B. $34,500 C. $32,000 D. cannot be determined

C

86. Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and bad debt expense is estimated at 3% of net credit sales. If net credit sales are $300,000, the amount of the adjusting entry to record the estimated uncollectible accounts receivables is A. $8,500 B. $8,500 C. $9,000 D. Cannot be determined

C

88. Under the allowance method of accounting for uncollectible receivables, writing off an uncollectible account. A. affects only income statement accounts. B. is not an acceptable practice. C. affects only balance sheet accounts. D. affects both balance sheet and income statement accounts.

C

89. When comparing the direct write-off method and the allowance method of accounting for uncollectible receivables, a major difference is that the direct write-off method A. uses a percentage of sales method to estimate uncollectible accounts. B. is used primarily by large companies with many receivables. C. is used primarily by small companies with few receivables. D. uses an allowance account.

C

92. The amount of a promissory note is called the A. realizable value B. maturity value C. face value D. proceeds

C

98. If the maker of a promissory note fails to pay the note on the due date, the note is said to be A. displaced B. disallowed C. dishonored D. discounted

C

75. At the beginning of the year, the balance in the Allowance for Doubtful Accounts is a credit of $760. During the year, $120 of previously written-off accounts were reinstated and accounts totaling $740 are written-off as uncollectible. The end of the year balance (before adjustment) in the Allowance for Doubtful Accounts should be A. $760 B. $120 C. $140 D. $740

C-140

100. A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is A. debit Cash, $6,120 credit Notes Receivable, $6,120 B. debit Accounts Receivable, $6,120 credit Notes Receivable, $6,000 Credit Interest Receivable, $120 C. debit Notes Receivable, $6,060 credit Accounts Receivable, $6,060 D. debit Accounts Receivable, $6,120 credit Notes Receivable, $6,000 Credit Interest Revenue, $120

D

101. When referring to a note receivable or promissory note A. the maker is the party to whom the money is due. B. the note is not considered a formal credit instrument. C. the note cannot be factored to another party. D. the note may be used to settle an accounts receivable.

D

107. Current assets are usually listed in order A. of the due date B. of the size C. alphabetically D. of liquidity

D

62. A debit balance in the Allowance for Doubtful Accounts A. is the normal balance for that account. B. indicates that actual bad debt write-offs have been less than what was estimated. C. cannot occur if the percentage of receivables method of estimating bad debts is used. D. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts

D

64. Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts A. Liabilities decrease. B. Net Income is unchanged. C. Total Assets are unchanged. D. Total Assets decrease

D

72. Allowance for Doubtful Accounts has a credit balance of $2,100 at the end of the year (before adjustment), and an analysis of customers' accounts indicates uncollectible receivables of $19,700. Which of the following entries records the proper adjustment for Bad Debt Expense? A. debit Allowance for Doubtful Accounts, $17,600 credit Bad Debt Expense, $17,600 B. debit Allowance for Doubtful Accounts, $21,800 credit Bad Debt Expense, $21,800 C. debit Bad Debt Expense $21,800 credit Allowance for Doubtful Accounts, $21,800 D. debit Bad Debt Expense, $17,600 credit Allowance for Doubtful Accounts, $17,600

D

80. A company uses the allowance method to account for uncollectible accounts receivables. When the firm writes off a specific customer's account receivable A. total current assets are reduced B. total expenses for the period are increased C. net realizable value of accounts receivable increases D. there is no effect on total current assets or total expenses

D

81. Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts to estimate the amount of uncollectible accounts of $41,900. Which of the following adjusting entries would be made to record the Bad Debt Expense for the year? A. debit Allowance for Doubtful Accounts, $40,600credit Bad Debt Expense, $40,600 B. debit Allowance for Doubtful Accounts $43,200 credit Bad Debt Expense, $43,200 C. debit Bad Debt Expense, $43,200 credit Allowance for Doubtful Accounts, $43,200 D. debit Bad Debt Expense, $40,600 credit Allowance for Doubtful Accounts, $40,600

D

85. When using the allowance method to estimate uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of: A. $110 B. $640 C. $530 D. $750

D

87. Allowance for Doubtful Accounts is classified as a(n) ______ and has a normal ______ balance. A. owners' equity, credit B. contra-asset, debit C. owners' equity, debit D. contra-asset, credit

D

91. When a company uses the allowance method of accounting for uncollectible receivables, the entry to reinstate a previously written off account would include: A. A credit to Bad Debt Expense B. A debit to Bad Debt Expense C. A debit to Allowance for Doubtful Accounts D. A credit to Allowance for Doubtful Accounts

D

94. A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of the note is A. $6,860 B. $7,140 C. $7,840 D. $7,000

D

74. Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year (before adjustment), and an analysis of accounts in the customers ledger indicates uncollectible receivables of $13,000. Which of the following entries records the proper adjusting entry for bad debt expense? A. debit Bad Debt Expense, $600 credit Allowance for Doubtful Accounts, $600 B. debit Bad Debt Expense, $12,400 credit Allowance for Doubtful Accounts, $12,400 C. debit Allowance for Doubtful Accounts, $600 credit Bad Debt Expense, $600 D. debit Bad Debt Expense, $13,600credit Allowance for Doubtful Accounts, $13,600

D. debit Bad Debt Expense, $13,600credit Allowance for Doubtful Accounts, $13,600

76. Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific receivable previously written off would include a A. credit to Bad Debt Expense B. credit to Accounts Receivable C. debit to Allowance for Doubtful Accounts D. debit to Accounts Receivable

D. debit to Accounts Receivable

51. Two methods of accounting for uncollectible accounts are the A. direct write-off method and the allowance method. B. allowance method and the accrual method. C. allowance method and the net realizable method. D. direct write-off method and the accrual method

a

60. What is the type of account and normal balance of Allowance for Doubtful Accounts? A. Contra asset, credit B. Asset, debit C. Asset, credit D. Contra asset, debit

a

63. To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a A. debit to Bad Debs Expense and a credit to Allowance for Doubtful Accounts. B. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. C. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable D. debit to Loss on Credit Sales and a credit to Accounts Receivable

a

42. The receivable that is usually evidenced by a formal instrument of credit is a(n) A. trade receivable. B. note receivable. C. accounts receivable. D. income tax receivable

b

44. Notes or accounts receivables that result from sales transactions are often called A. non-trade receivables. B. trade receivables. C. merchandise receivables. D. sales receivables

b

47. The two methods of accounting for uncollectible receivables are the allowance method and the A. equity method B. direct write-off method C. interest method D. cost method

b

56. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible? A. Uncollectible Accounts Expense B. Allowance for Doubtful Accounts C. Accounts Receivable D. Interest Expense

b

57. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of the accounts receivable? A. $51,000 B. $289,000 C. $340,000 D. $391,000

b

58. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible? A. Uncollectible Accounts Expense B. Accounts Receivable C. Allowance for Doubtful Accounts D. Interest Expense

b

45. The term "receivables" includes all A. money claims against other entities. B. merchandise to be collected from individuals or companies. C. cash to be paid to creditors. D. cash to be paid to debtors

c

46. When does an account become uncollectible? A. when accounts receivable is converted into notes receivable B. when discount is availed on notes receivable C. there is no general rule for when an account becomes uncollectible D. at the end of the fiscal year

c

50. An alternative name for Bad Debt Expense is A. Collection Expense. B. Credit Loss Expense. C. Uncollectible Accounts Expense. D. Deadbeat Expense

c

59. On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the A. Uncollectible accounts expense for the year B. total of the accounts receivables written-off during the year C. total estimated uncollectible accounts as of the end of the year D. sum of all accounts that are past due

c

41. A note receivable due in 18 months is listed on the balance sheet under the caption A. long-term liabilities B. fixed assets C. current assets D. investments

d

43. Which of the following receivables would not be classified as an "other receivable"? A. Advance to an employee B. Interest receivable C. Refundable income tax D. Notes receivable

d

49. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited A. at the end of each accounting period. B. when a credit sale is past due. C. whenever a pre-determined amount of credit sales have been made. D. when an account is determined to be worthless

d

54. The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which of the following?: A. debit Allowance for Doubtful Accounts credit Accounts Receivable B. debit Sales Returns and Allowance, credit Accounts Receivable C. debit Bad Debt Expense credit Allowance for Doubtful Accounts D. debit Bad Debt Expense credit Accounts Receivable

d

55. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible? A. Uncollectible Accounts Receivable B. Accounts Receivable C. Allowance for Doubtful Accounts D. Bad Debts Expense

d

61. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when A. a customer's account becomes past due. B. an account becomes bad and is written off. C. a sale is made. D. management estimates the amount of uncollectibles

d