Multiple Choice

Which of the following is true of the balance sheet presentation of the allowance for bad debts? A)It is shown as a contra account related to accounts receivable B)It is reported as an operating expense It is reported as a separate, independent line item under current assets C)It is reported as a separated, independent line item under current assets D)It is reported as a current liability

A)It is shown as a contra account related to accounts receivable

Which of the following is the correct formula for calculating gross profit percentage? A)net profit/net sales revenue B)gross profit/net sales revenue C)net sales revenue/gross profit D)net sales revenue/net profit

B)gross profit/net sales revenue

Which of the following is not included in a perpetual inventory record A)unit selling price B)identification of the inventory item C)cost per unit D)quantity on hand

B)identification of the inventory item

The entry to write off an account receivable under the allowance method will A)reduce net income B)increase total assets C)have no effect on net income D)increase net income

C)have no effect on net income

A company made net sales revenue $550,000, and cost of goods sold totaled $192,500. Calculate its gross profit percentage A)315% B)130% C)35% D)65%

D)65%

The two methods of accounting for uncollectible accounts receivable are A)The allowance method and the liability method B)The asset method and the liability method C)The direct write-off method and the liability method D)The allowance method and the direct write-off method

D)The allowance method and the direct write-off method

When using the allowance method, the write-off of a receivable A)affects the net realizable value of accounts receivable B)involves a contra-revenue account C)decreases net income D)reduces the amount of the allowance for bad debts account

D)reduces the amount of the allowance for bad debts account

A method of accounting for uncollectible receivables in which the company estimates bad debts expense instead of waiting to see from which customers the company will not be able to collect is known as the allowance method True of False

True

Jayson enterprises uses the allowance method to account for uncollectible receivables. When an uncollectible account is written off A)the write off has no effect on net income B)no entry is required because bad debt expense is estimated at the end of the accounting period C)the Bad Debt Expense account is debited D)the Allowance for Bad Debts account is credited

A)the write off has no effect on net income

Bad debt expense is a cost to the seller of extending credit True or False?

True

The allowance for bad debts is a contra account to accounts receivable True or False

True

The expense associated with the cost of uncollectible accounts receivable is called bad debt expense True of False?

True

When using the allowance method to account for uncollectible accounts receivable companies estimate bad debt expense at the end of the period and then record an adjusting entry True or False

True

When using the allowance method, allowance for bad debts is debited when an account receivable is written off True or False

True