Accounting Ch.5 smartbook
The estimated expense for accounts that may not be collected is referred to as_________ ________ expense
bad debt
The income statement approach for estimating bad debts uses a percentage of...
credit sales
When a business provides services to a customer, and the customer promises to pay later, this is referred to as...
credit sales
When a customer returns a product for a refund, in which account is the entry recorded?
sales return
When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a(n)...
sales return
A cash discount representing a reduction in the amount to be paid by a credit customer if the customer pays within a specified period of time is also referred to as a(n)____________discount
sales/cash
Accounts receivable are typically classified as current assets because...
they will be converted to cash within 1 year.
The cost of estimated accounts receivable that will not be collected is referred to as___________ expense
uncollectible accounts
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 list price in Boyton's catalog indicates that Product A sells for $3,000, with a trade discount of 5%. Boyton sells the goods to a customer who qualifies for the trade discount. At what amount should Boyton record the sale and related account receivable?
$2,850
The direct write-off method is required for...
income tax purposes.
Where is a note receivable reported in the balance sheet?
In either current or noncurrent assets, as appropriate.
Net revenues is calculated as total revenues minus which of the following items?
-Sales returns -Sales allowances -Sales discounts
Two important ratios that help in understanding a company's effectiveness in managing receivables are the:
-average collection period -receivable turnover ratio
Sales to customers in which the customers pay within 30 to 60 days are referred to as...
-credit sales -sales on account
The journal entry to record bad debt expense includes...
-credit to allowance for uncollectible accounts -debit to bad debt expense
A trade discount is a reduction from the list price, which is used to:
-disguise real prices from competitors -give quantity discounts to customers -change prices without publishing a new catalog
Two entries are required when a previously written off account is collected. These two entries include:
-record the collection on the account receivable -reinstate the account receivable
______________ _______________is the legal right to receive cash from a credit sale and represents an asset of the company
Accounts receivable
When an account previously written off is collected in full, which is required to ensure the accounting for the complete payment history of the customer?
An entry to reinstate the account receivable and an entry to record payment.
Amend Inc. debited Accounts Receivable and credited Allowance for Uncollectible Accounts to reestablish an account previously written off. Amend Inc. should also debit _______ and credit _______.
Cash; Accounts Receivable
The allowance method is required by...
GAAP
What is the formula for the receivables turnover ratio?
Net credit sales divided by average accounts receivable (net).
A trade discount is...
a percentage reduction from list price.
An informal credit arrangement with a customer for payment to be received after the sale is classified as a(n)...
account 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 approach that considers the age of various accounts receivables to estimate uncollectible accounts is referred to as the_______________method of accounts receivable
age
A partial adjustment to the amount owed by the customer for goods that were not returned, but did not fully meet the customer's expectations is referred to as a sales...
allowance
To record an estimate for future bad debts at the end of the period, an 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
Accounts receivable should be classified as a(n)...
asset
The formula to compute the receivables turnover ratio is net credit sales divided by...
average accounts receivable.
Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to...
be more accurate.
A trade discount is recognized...
by reducing the revenue amount recorded.
Allowance for Uncollectible Accounts has a credit balance because it is a(n) _____ account.
contra-asset
The account "Allowance for Uncollectible Accounts" normally has a____________ balance
credit
The income statement approach for estimating bad debts focuses on...
current year's credit sales.
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 Inc. just learned that Patton Inc., 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(n):
decrease in Accounts Receivable
A sales allowance ____ the amount owed by the customer for merchandise that is _____ by the customer.
decreases; retained
The receivables turnover ratio and the average collection period provide information about a company's...
effectiveness in managing receivables
Using a percentage of each period's net credit sales to estimate bad debt expense is a(n)_________ ___________approach to measuring bad debts.
income statement
Total revenues less discounts, returns, and allowances are referred to as_________revenues.
net
Pixie Inc. writes off a specific accounts receivable. If Pixie is using the allowance method, the write off will _____ net income.
not affect
Receivables not expected to be collected should...
not be counted in assets of the company.
A formal, signed credit agreement between a lender and a borrower is called a(n) __________ by the lender.
note receivable.
