ACG ch. 8

Which one of the following is part of the transaction that is recorded when an account is written off under the allowance method?

Allowance for doubtful accounts is debited

Which of these is a generally accepted method fro accounting for uncollectible accounts when a company has a significant amount of expected bad debt losses?

Allowance method for uncollectible accounts

Which one of the following is not a method used by companies to accelerate cash receipts?

Allowing customers to settle their accounts by issuing notes

When is a receivable recorded by a merchandiser?

At the point of sale of the merchandise on account

factoring arrangements

are a way to accelerate receivables collection

When an account receivable is written off using the allowance method, the

net realizable value will stay the same

The type of receivable that is usually evidence by a formal instrument of credit is a

note receivable

Which one of the following is not a method used by companies to accelerate cash receipts?

Writing off receivables

Which of the following is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of a company

A concentration of credit risk

Which one of these statements about promissory notes is incorrect?

A promissory note is a negotiable instrument

Which of these statements about national credit card sales is correct?

A retailer's acceptance of a national credit card is a form of factoring the receivable by the retailer

Under the direct write-off method of accounting for uncollectible accounts

A specific account receivable is decreased for the actual moment of bad debt at the time of write-off

Offering discounts for early payment is a method used by companies to

Accelerate the collection of cash

Which of the following are used to compute cash realizable value?

Accounts receivable and allowance for doubtful accounts

Which one of the following account pairs are both permanent accounts?

Accounts receivable; Allowance for doubtful accounts

Which one of the following is part of the transaction that is recorded when an account is written off under the allowances method?

Accounts receivables is credited

Which of the following is the correct sequence to report receivables on the balance sheet?

Accounts receivables, a 6 month note receivable, other receivables

When the allowance method for uncollectible accounts is used, a company records bad debt expense when

Adjusting entries are recorded

Under the allowance method, writing off an uncollectible account

Affects two balance sheet accounts

Which of the following accounts is a temporary account?

Bad debt expense

Which of the following statements is true?

Bad debt expense is a temporary account and is closed at the end of the fiscal period, while allowances for doubtful accounts is a permanent account and remains open at the end of the fiscal period.

Which of the following accounts is debited when a company factors its accounts receivable?

Cash

At what value are accounts receivable reported on the balance sheet?

Cash realizable value

If a company is concerned about lending money to a risky customer, which one of the following would it want to do?

Contact references provided by the customer, such as banks and other suppliers

The account Allowance for doubtful accounts is classified as a

Contra account to accounts receivable

Which one of the following is not one of the principles of managing accounts receivable?

Cross-indexing journal-entries with the posting to the ledger

Which one of the following is not one of the principles of managing accounts receivable?

Determining from which vendor credit should be requested

What is often the most critical part of managing receivables?

Determining who gets credit and who does not get credit

If a company fails to record estimated bad debts expense then its

Equity is overstated

When an uncollectible account is recovered after it has been written off, two journal entries are recorded. which of the following accounts will be debited in these two journal entries?

First accounts receivable and second cash

When an uncollectible account is recovered after it has been written off, two journal entries are recorded. Which one of the following accounts will be credited in these two journal entries?

First the allowance for doubtful accounts and second accounts receivable

When a merchandiser sells goods, it increases Accounts Receivable by debiting it and it _________ Sales Revenue by __________ it.

Increases; crediting

Which of the following should be classified as an "other" receivable?

Interest receivable

Receivables are assets that must be reported in the order of

Liquidity

One might infer from a debit balance in Allowance for Doubtful Accounts that

More accounts have been written off than the estimates for bad debts

Accounts receivable are reported in the current assets section of the balance sheet at

Net realizable value

At what value are accounts receivable reported on the balance sheet?

Net realizable value

Which one of these statements about promissory notes is correct?

Notes receivable are formal agreements

Which of the following receivables would not be classified as an "other receivable"?

Notes receivables

When a note receivable is paid on time and no interest has been previously accrued, what will the journal entry to record the transaction contain?

One debit and two credits

If a company is concerned about lending money to a risky customer, which one of the following would it not want to do?

Provide the customer a lengthy payment period

Which of the following is true with regards to receivables?

Receivables are claims that are expected to be collected in cash

Which of these statements about national credit card sales is false?

The retailer conducts the credit investigation of the customer

If a company that uses the allowance method for uncollectible accounts collects an account receivable after having been previously written off

There will be both a debit and a credit to accounts receivable

Under the allowance method for uncollectible accounts, when a specific account is written off

Total assets will be unchanged

What type of receivables result from sales transactions?

Trade receivables

Which of the following is false with regards to notes receivable?

When a note is dishonored, the lender no longer has a claim against the maker of the note

Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited

When an account is determined to be uncollectible

The allowance for doubtful accounts is necessary in accrual accounting because

When recording uncollectible accounts expense, it is not possible to know which specific accounts will not be collected from customers

When is a receivable recorded by a service organization?

When service is provided on account?

A promissory note will likely be used in all of the following setting except

When the party making the note is a high risk creditor

Short-term notes receivable are reported in the current assets section of the balance sheet at

cash realizable value

A high accounts receivable turnover ratio indicates

customers are making payments very quickly

A company uses the allowance method for uncollectible accounts. Last year, a customer purchased $100 of services on account from the company. In the current year, the company is notified that the customer is bankrupt and will not pay the company the amount owed. What journal entry does the company record when it is notified that the customer will not pay?

debit allowance for doubtful accounts and credit accounts receivable

The adjusting entry to record estimated uncollectible accounts receivable using the allowance method includes a

debit to bad debt expense and a credit to allowance for doubtful accounts

Writing-off a specific customer's accounts receivable under the allowance method

does not affect the balance of cash

If a company collects from a customer after the customer's account has been written off as an uncollectible, the company is said to recover the uncollectible account. When a company uses the accrual basis accounting and it recovers an uncollectible accounts, the recovery

does not affect the company's total assets in the period it is collected

The direct write-off method of accounting for bad debts

does not require estimates of bad debt expense

A debit balance in the Allowance for Doubtful Accounts

indicates that actual bad debt write-offs have exceeded previous provisions for bad debts

The account called allowance for doubtful accounts

is deducted from accounts receivable on the balance sheet to compute cash realizable value

The direct write off method of accounting for uncollectible accounts

is not generally accepted as a basis for estimating bad debts

The direct write-off method of accounting for uncollectible accounts?

is not generally accepted as a basis for estimating bad debts

Under the allowance method of accounting for uncollectible accounts,

the net realizable value of accounts receivable in the balance sheet is the same before and after an account is written off