Chapter 5 LS assignment

Accounts receivable has a $2,300 balance, and the allowance for doubtful accounts has a $200 credit balance. An $80 account receivable is written off. Net receivables (net realizable value) after the write-off equals:

$2,100

Below is a schedule of accounts receivable. Using the aging method, determine the ending balance in the allowance for uncollectible accounts.

$4,800

Gammy Corporation provides services with a normal price of $800,000 and a trade discount of $100,000. Terms are 2/10,n/30 and the customers pay within 10 days. The net service revenue is

$686,000

Payment for credit sales are typically due in _ to _ days.

30,60

Which method of accounting requires estimating bad debt expense and matching the expense to sales of that period?

Allowance method

When are account previously written off is collected in full, which entry 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

Joyce Corp. uses the percentage-of-credit-sales method to account for bad debt expense. Joyce determines that a customer account of $20,000 should be written off as uncollectible. The write off of the account will include which of the following entries?

Credit to Accounts Receivable Debit to allowance for Uncollected accounts

Zeiger Corporation sells gods to a customer on account for $2,000, terms 2/10,n/30. When the customer pays on the 12th day, Zeiger records which of the following?

Debit cash $2,000

A company makes a sale on terms 2/10, n/30. What does this mean?

If the discount is not taken in 10 days, the net amount is due in 30 days. The customer may take a 2% discount off the price if paid within 10 days.

bad debt expense is reported on the

Income statement operating expense

Which of the following are classified as receivables?

Interest due from loans to customers loans by a company to other entities

Which of the following are classified as receivable?

Loans by a company to other entities.

What type of payment tend to increase sales and profitability in the long run

Sales on account

In which situations does a company accept a note receivable?

The company converts an existing account receivable to grant the customer an extended payment period for the amount owed plus interest. The company lends money to employees or businesses.

a trade discount is

a percentage reduction from a list price

A(n) _ receivable is an informal credit arrangement with trade customers, whereas a(n) receivable is a formal signed credit arrangement between a creditor and a debtor

account, notes

trade receivable is another term or _ receivable.

accounts

The allowance for uncollectible accounts a contra account to

accounts receivable

Recording sales returns and allowances in a separate contra-revenue account helps managers:

analyze the transactions

A customer account that is not expected to be collected is referred to as a(n) _ debt.

bad

Zeigen Inc. debited accounts receivable and credited allowance for doubtful accounts. Zeigen Inc. should also debit _ and credit _ _.

cash, accounts, receivable

A sale to a customer on account should be recognized when the goods or services are delivered and

collection of the receivable is probable

The sales discount account is classified as a

contra revenue account

A trade discount is a reduction from the list price, which is used to:

disguise real prices from competitors change prices without publishing a new catalog give quantity discounts to customers

The write-off of a specific accounts receivable _ total assets reported on the balance sheet.

does not affect

Because some of the amounts reported in financial statements are based on _ some of the information may be inaccurate.

estimates

an aging schedule classifies accounts receivable based on

length of time outstanding

The unadjusted balance of the allowance for uncollectible accounts is equal to the estimate of uncollectible accounts at the end of last year _ actual write-offs during the _ year.

less;current

The direct write-off method violates which accounting concept?

matching expenses to their revenues in the same period

A potential disadvantage of the allowance method is that it:

may be used to manage earnings

The account "Allowance for Uncollectible Accounts" normally has a _ balances.

credit

Income tax receivable is a _ receivable.

nontrade

A sales allowance _ the amount owed by the customer for merchandise that is _ by the customer.

decreases;retained

Pine corporation provides $1,000 of services on account with terms 2/10, n/30. If the customer takes the discount and pays within 10 days, Pine will receive

980

Adrian Corp. sells goods on account for $100,000 on May 1. On May 15, the customer returns $40,000 of the merchandise. The customer ha not yet paid for any goods. What will Adrian record on May 15?

Debit to sales returns Credit to accounts receivable.

Prime corp. has an ending balance in the accounts receivable account of $100,000. Prime recorded bad debt expense of $3,000. Prime has an ending balance in the allowance for uncollectible accounts of $7,000. What is the net realizable value of accounts receivable?

$93,000

Which of the following items are classified as receivables?

1. Amounts owed by customers. 2. Tax refund claims. 3.Amounts loaned and expected to be repaid.

during the year, claire wrote off $9,000 of accounts receivable that were uncollectible. What is bad debt expense for the period?

16,000

Sales revenue is reported net of these amounts:

actual sales discounts taken by customers actual sales return and allowances granted to customers estimated sales returns and allowances pertaining to current year sales

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

A company that expects the some of its customers will not pay the agreed upon sales price must utilize the

allowance method

Which of the following items are classified as receivables?

amounts owed by customers tax refund claims amounts loaned and expected to be repaid

Raven receives a 3-year note receivable from a customer for goods sold. How should Raven report this note receivable in its financial statements?

as a noncurrent asset

Quavier Inc. adjusts its allowance account to reflect the estimate of future uncollectible accounts. This adjustment achieves matching of expenses with revenue in the same period _.

as the revenue they helped generate

York Inc, records a year-end adjustment for estimates sales return and allowances. as a result of this entry, york's financial statements will change as follows:

assets decrease equity decrease

With the allowance method, bad debt expense is recorded

at the end of the period when bad debts are estimated.

for a typical credit sale, the revenue recognition criteria is usually satisfied

at the point of delivery

The estimated expense for accounts that may not be collected that is matched against revenue of the period is referred to as

bad debt expense

The direct write-off method involves a debit to _ and a credit to _.

bad debt expense;accounts receivable

Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to

be more accurate

The account sales return and allowances account is a(n) _. _ account and requires a _ entry to increase the account.

contra - revenue debit

The sales returns and allowances account is classified as a

contra revenue account

sales to customers in which the customer pays within 30 to 60 days are referred to as

credit sales, sales on account

The journal entry to record bad debt expense includes a:

credit to allowance for uncollectible accounts debit to bad debt expense

An account receivable is normally classified as a

current asset

A disadvantage to selling on account is

customers do not always pay

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 a

debit Allowance for Uncollectible Accounts.

kim corporation provides services at the gross amount and uses discount account to account for the discounts taken by customers. kim provides services on account for $5,000 with terms 2/10, n/30. Recording this transaction will include a

debit to accounts receivable, $5,000

During the year, Connor wrote off $17,000 of accounts receivable that were uncollectible. The adjustment to record bad debt expense at the end of the period was a

debit to bad debt expense for $20,000

Kilroy Corporation provides services to a customer for $1,000. The customer complained that there was a slight defect in the service. Kilroy granted the customer a $50 credit. Kilroy will record this adjustment to the sales price with a

debit to sales allowances $50.

Notes receivable normally has a(n) _ balance because it is classified as a(n) _.

debit, asset

What are the financial statement effects of recording bad debt expense using the allowance method?

decrease assets increase expenses

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

The allowance method is a method of accounting that is _ net accounts receivable (as well as net income) for estimated bad debts.

decreases

The accounts receivable account is reduced when the seller:

determines that a specific customer account will not be collectible

Which method of accounting requires recognizing bad debt expense when it is determined that the customer cannot pay?

direct write-off method

At the beginning of the year, Block Company's allowance account has a debit balance of $10,000. this may indicate that the

estimate of uncollectible accounts was too low

sales revenue is reported net of these amounts:

estimated sales returns and allowances pertaining to current year sales actual returns and allowances granted to customers actual sales discounts taken by customers

The formula for calculating interest on a note is

face value x annual rate x fraction of the annual period

When the allowance method is used, the write-off of an uncollectible account:

has no effect on net income

The allowance for uncollectible accounts has a debit balance at the end of the year prior to recording bad debt expense. This means that write offs of accounts were _ than the estimated bad debt expense for the previous year.

higher

The financial statement effects of recording an allowance for estimate sales return are that:

income decreases assets decrease equity decreases

The percentage-of-receivable approach to measuring bad debt expense focuses on

net realizable value of accounts receivable

A formal credit arrangement between a creditor and debtor is called a(n)

note receivable

A(n) _ receivable typically yields interest revenue and possesses a fairly high probability of collectibility.

notes

The direct write-off method is normally not permitted for U.S. GAAP reporting because if related credit sales occurred in the prior year, it:

overstates net income in the prior year overstates assets in the prior year

a company's claims to the future collection of cash, other assets, or services is called a _.

receivable

At the end of the year, Kunze Corporation estimates that $1,600 worth of merchandise sold during the current year will still be returned by customers during the subsequent year. Kunze Corporation must

record the estimated returns at the end of the year.

The primary disadvantage of offering discounts to customers is that they:

reduce current period net revenue

The purpose of recording an allowance for uncollectible accounts is to

report accounts receivable at net realizable value.

if sales return are incorrectly treated as expenses, what are the effects on the financial statements?

revenues are overstated expenses are overstated

Glasser Corp. provided $20,000 of services on account. The account that should be credited is ______ _____.

service revenue

Accounts receivable are classified as current assets because

they will be converted to cash within 1 year or the normal operating cycle

The process of estimating for an allowance for uncollectible accounts, writing off bad debt in the following periods, and then reestimating the allowance at the end of the period occurs:

throughout the company's life

Accounts receivables from sales to customers are _ receivables.

trade

The direct write-off method is used when

uncollectible accounts are not anticipated or are immaterial

The formula to compute the receivables turnover ratio is net sales divided by

average accounts receivable

The _ _ value of accounts receivable is the amount of cash a company expects to collect.

net realizable

a sale to a customer on account should be recognized when the goods or services are delivered and

collection of the receivable is probable

A(n) _ balance before adjustment indicates that the estimate of uncollectible accounts at the beginning of the year may have been too high.

credit

If the allowance for uncollectible accounts is 25% of gross accounts receivable, this might indicate

credit policies are too lenlent

Jordan corporation settles an account receivable from london company by accepting a six-month interest bearing note receivable with an interest rate of 8%. The effect on Jordan financial statements is

no change in current assets

During the year, Inga Corporation writes a specific accounts receivable. Assuming that Inga Corporation uses the allowance method, what is the effect of collecting the written-off accounts receivable on net income?

no effect

Which of the following is a discount that is a reduction in the sales price if the customer pays within a specified time period?

sales discount

When merchandise is returned for a refund of for credit to be applied to other purchases, the situation is called a(n) _ _.

sales return

accounts receivable from sales to customers are _ receivables.

trade

A trade discount is a reproduction from the list price, which is used to:

Change prices without publishing a new catalog give quantity discounts to customers disguise real prices from competitors

The term net accounts receivable refers to

accounts receivable less the allowance for uncollectible accounts