Chapter 5: Receivables and Sales

Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad debt expense of $1,000. Tudor has an ending balance in the allowance for uncollectible accounts of $2,000. What is the net accounts receivable balance?

$18,000 (because $20,000 - $2,000 = $18,000)

The allowance method is required by __________.

GAAP (Generally Accepted Accounting Principles)

The account "Allowance for Uncollectible Accounts" is classified as an expense in the income statement. a contra asset to accounts receivable. a liability account in the balance sheet. a contra equity account.

a contra asset to accounts receivable

A trade discount is an increase in the account receivable. a rebate from the manufacturer. a reduction from list price. a percentage reduction of the amount due for early payment.

a reduction from list price

A trade discount is: an increase in the account receivable. a percentage reduction of the amount due for early payment. a rebate from the manufacturer. a reduction from list price.

a 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. prepaid receivable. note payable. nontrade receivable.

account receivable

The allowance for uncollectible accounts is a contra account to revenue. sales allowances. bad debt expense. accounts receivable.

accounts receivable

The amount of cash owed to a company by its customers from the sale of goods or services is referred to as: a guarantee. accounts receivable. uncollectible accounts. accounts payable.

accounts receivable

The cost of estimated accounts receivable that will not be collected is referred to as a _______ _______ expense.

bad debt

When a business provides services to a customer, and the customer promises to pay later, this is referred to as cash sales. credit sales. current sale. operating sales.

credit sales

Sales to customers in which the customers pay within 30 to 60 days are referred to as (Select all that apply.) nonaccrued sales. credit sales. sales on account. deferred sales.

credit sales sales on account

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. debit Accounts Receivable. debit Bad Debt Expense. credit Sales Returns and Allowances.

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): increase in Accounts Receivable decrease in Sales Revenue increase in Allowance for Doubtful Accounts decrease in Accounts Receivable increase in Sales Revenue

decrease in accounts receivable

A sales allowance ____ the amount owed by the customer for merchandise that is _____ by the customer. decreases; returned. increases; returned increased; retained decreases; retained

decreases; retained

True or false: Accounts receivable not expected to be collected should be counted in the assets of the company until they are later written off.

false

Under the allowance method, companies estimate _____ uncollectible amounts and report those estimates in the _____ year. future; current current; future future; future current; current

future; current

A company that expects that some of its customers will not pay the agreed upon sales price must utilize the bad debt method direct write-off method allowance method debt forgiveness method

allowance method

Accounts receivable should be classified as a(n)

asset

Accounts receivable should be classified as a(n) expense. liability. asset. revenue.

asset

A sales allowance ____ the amount owed by the customer for merchandise that is _____ by the customer. increased; retained decreases; retained decreases; returned. increases; returned

decreases; retained

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 accounts receivable balance?

$93,000 (because $100,000 - $7,000)

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 credit. debit. allowance. discount.

allowance

To record an estimate for future bad debts at the end of the period, an adjustment would be made with a credit to bad debt expense. accounts receivable. sales returns and allowances. allowance for uncollectible accounts.

allowance for uncollectible accounts

The account "Allowance for Uncollectible Accounts" normally has a _______ balance.

credit

The journal entry to record bad debt expense includes: debit to allowance for uncollectible accounts credit to bad debt expense debit to bad debt expense credit to allowance for uncollectible accounts

debit to bad debt expense credit to allowance for uncollectible accounts

A trade discount is a reduction from the list price, which is used to: (Select all that apply.) give quantity discounts to customers encourage customers to pay quickly change prices without publishing a new catalog reduce the sale price for interest received disguise real prices from competitors

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

Receivables not expected to be collected should not be counted in assets of the company. initially be included as assets and then be written off when the customer does not pay. always be counted in assets of the company.

not be counted in the assets of the company

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 discount

Which of the following is a discount in the amount to be paid if the customer pays within a specified time period? Quantity discount Purchase discount Trade discount Sales discount

sales discount

When a customer returns a product for a refund, in which account is the entry recorded? purchase discount purchase return sales return sales discount

sales return

When a customer returns a product for a refund, in which account is the entry recorded? sales discount purchase return purchase discount sales return

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

Accounts receivable are typically classified as current assets because they are a formal agreement to pay within a specific period of time. they are matched with accounts payable for the period. they accrue interest at a specified interest rate. they will be converted to cash within 1 year.

they will be converted to cash within 1 year

Accounts receivable are typically classified as current assets because they are a formal agreement to pay within a specific period of time. they will be converted to cash within 1 year. they are matched with accounts payable for the period. they accrue interest at a specified interest rate.

they will be converted to cash within 1 year

The allowance method estimates trade discounts. uncollectible accounts. sales discounts. future sales.

uncollectible accounts