Chapter 6 Review

6.9

A company's average number of days for payment is 53. Its accounts receivable turnover ratio (rounded to the nearest 0.1) is

TRUE

Accounts receivable turnover ratio that increases from 5 to 6 is a positive trend.

FALSE

Analyzing accounts receivable according to when they are due is known as aging net sales.

TRUE

Applying the Matching Expenses with Revenue concept, uncollectible accounts expense should be recorded in the same fiscal period in which the sales revenue is earned.

61

Beginning Book Value of Accounts Receivable - $18,000 Ending Book Value of Accounts Receivable - $22,000 Net Sales - $120,500 Calculate days' sales in accounts receivable for the current year and round to the nearest day.

6.0

Beginning Book Value of Accounts Receivable - $18,000 Ending Book Value of Accounts Receivable - $22,000 Net Sales - $120,500 Calculate the Accounts Receivable turnover ratio and round to the nearest 0.1.

66

Beginning Book Value of Accounts Receivable - $52,000 Ending Book Value of Accounts Receivable - $47,000 Net Sales - $270,000 Calculate days' sales in accounts receivable for the current year and round to the nearest day.

5.5

Beginning Book Value of Accounts Receivable - $52,000 Ending Book Value of Accounts Receivable - $47,000 Net Sales - $270,000 Calculate the Accounts Receivable turnover ratio and round to the nearest 0.1.

TRUE

Canceling the balance of a customer account because the customer is not expected to pay is known as writing off an account.

48

Carlson Co. has terms of 2/10, n/30. Its accounts receivable turnover ratio is 7.6. The average number of days for payment is (rounded to the nearest day)

A debit to Uncollectible Accounts Expense and a credit to Accounts Receivable

Good Company wrote off the $400 past-due account of Ann Smith. Using the write-off method, the entry in the general journal includes

3%

Holth Company had $450,000 in net sales for the year. Its adjusting entry for estimated uncollectible accounts expense was $13,500. What is the percentage of net sales that is estimated to become unollectible?

FALSE

If a business carefully checks credit ratings before granting credit to customers, the business will not experience any uncollectible accounts.

FALSE

Jones, Inc., estimates that 2% of its net sales will become uncollectible. The adjustment is made by debiting Uncollectible Accounts Expense and crediting Accounts Receivable.

FALSE

Recording uncollectible accounts expense at the time the amount is actually known to be uncollectible is called the allowance method of crediting losses from uncollectible accounts.

TRUE

Regardless of whether a business uses the direct write-off or allowance method, accounts receivable should be reported on the balance sheet at net realizable value.

TRUE

The accounts receivable turnover ratio is a measure of collection efficiency.

A debit to Uncollectible Accounts Expense and a credit to Allowance for Uncollectible Accounts

The adjusting entry to record the estimated uncollectible accounts expense using the percentage of sales method is

$62,500

The beginning book value of accounts receivable is $55,000. The ending book value of accounts receivable is $70,000. The average book value of accounts receivable is

Cash receipts and general

The collection of a written-off account involves entries in what two journals?

$530 credit

The credit balance in Allowance for Uncollectible Accounts is $50. The estimated uncollectible accounts expense using the percentage of accounts receivable method is $530. After the adjusting entry has been recorded, the balance in Allowance for Uncollectible Accounts will be a

$3,300 credit

The debit balance in Allowance for Uncollectible Accounts is $300. Based on an aging of accounts receivable, the company expects that $3,000 of accounts receivable will become uncollectible. The amount of the adjusting entry to Allowance for Uncollectible Accounts will be a

TRUE

The difference between the balance of Accounts Receivable and its contra account, Allowance for Uncollectible Accounts, is the book value of accounts receivable.

Reopen the account receivable

The first step in recording the collection of an account that has been written off is to

TRUE

The larger the accounts receivable turnover ratio, the fewer the average number of days for payment.

FALSE

Two methods used to estimate uncollectible accounts expense are the percentage of sales method and the percentage of uncollectible accounts receivable method.

FALSE

Using the direct write-off method, no attempt is made to collect accounts that have been written off because the account no longer appears in the accounting records of the business.

$5,134.50

Walsh, Inc., sells most of its merchandise on account. The business has the following general ledger account balances on December 31 of the current year, before adjusting entries are recorded. Accounts Receivable - $17,000 Allowance for Uncollectible Accounts (credit) - $100 Sales - $250,000 Sales Discount - $1,500 Sales Returns and Allowances - $4,000 Total uncollectible accounts expense if uncollectible accounts are calculated as 2.1% of net sales:

TRUE

When collection is made on an account that has been written off, two journal entries are made. One reopens the customer's account, and the other records the receipt of cash.

FALSE

When customers receive notices that their accounts have been written off, they no longer owe on the account receivable.