Accounting 121A Chapter 7 Smartbook

When a specific account receivable is determined to be uncollectible, which of the following occur? (Select all that apply.)

-Account receivable is reduced -Allowance account is reduced

How do sellers typically account for returns? (Select all that apply.)

-As returns occur. -Using an adjusting entry at the end of the period for any remaining future expected returns.

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

Which of the following situations require cash to be restricted? (Select all that apply.)

-Requirement to use cash for future plant expansion. -Requirements to set aside funds to repay debt.

Which of the following items are included in cash? (Select all that apply.) -currency and coins -accounts receivable from customers -balance in checking accounts -notes receivable from customers -checks from customers

-currency and coins -balance in checking accounts -checks from customers

Examine the following journal entry. Debit Refund liability $10,000; credit Cash $10,000; debit Inventory $6,000; and credit Inventory-estimated returns $6,000. What is the transaction that required this entry?

Adjustment for sales returns that occurred.

A company believes its sales returns will be material. What is the journal entry required?

Debit sales returns; credit allowance for sales returns.

Which method(s) permit the offsetting of bank overdrafts against cash balances?

IFRS only

Tom Company offers Jane Company discount terms of 5/15, n/45. What does this mean?

Jane will have to pay full amount if payment is made after day 15.

To record bad debts at the end of the period, an adjustment would be made by a credit to

allowance for uncollectible accounts

When an accounts receivable is written off, which account is impacted?

allowance for uncollectible accounts

Which method of estimating bad debts is required by GAAP when the amount of bad debt is material?

allowance method

The balance sheet approach to measuring bad debt expense focuses on

appropriate carrying value of accounts receivable

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

bad debt expense

The balance sheet approach estimates ____ ____ expense by determining the appropriate carrying value of accounts receivable. (Enter one word per blank.)

bad; debts

A(n) ____ balance is a cash restriction in connection with a loan that creates a higher effective interest rate on that loan. (Enter only one word.)

compensating

When an account previously written off is collected in full, the entry to reinstate the account would require which of the following? (Select all that apply.)

credit Allowance for Uncollectible Accounts; Debit Accounts Receivable

The income statement approach for estimating bad debts focuses on

current year's credit sales

Sully Corporation uses an allowance method for accounting for bad debt expense. Sully estimates that 2% of sales will eventually become uncollectible. If Sully has $100,000 of credit sales and $100,000 of cash sales during the year, the adjustment for estimated uncollectible accounts will require a

debit to bad debt expense $2000

The two methods used for recording sales discounts are the ____ method and the ____ method. (Enter only one word per blank.)

gross; net

The direct write-off method is required for

income tax purposes

Separation of duties requires that -two employees may not work on the same project if they are related. -the board of directors may not influence the decisions of the top managers. -individuals who have physical responsibility for assets should not have access to accounting records. -an employee procedures manual must be developed to describe duties.

individuals who have physical responsibility for assets should not have access to accounting records.

U.S. GAAP typically requires that bank overdrafts be treated as ____ on the balance sheet where IFRS allows them to offset other cash accounts. (Enter only one word.)

liabilities

Cobalt Corp. uses the allowance method to account for bad debts. If Cobalt writes off an account for $3,000, what is the effect on the balance sheet?

no effect on total assets

When a bank requires a borrower to set aside funds for the future payment of debt, this is known as what?

restricted cash

When all or a portion of an account receivable is determined to be uncollectible, what occurs?

the amount of the receivable is written off

A ____ discount is a way to change prices without publishing a new catalog. (Enter only one word.)

trade

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.

Under the allowance method, when is bad debt expense recognized?

when the allowance is created

Internal control procedures for cash disbursements (other than small disbursements from petty cash) should include that (Select all that apply.) -employees in charge of cash receipts are also in charge of cash disbursements. -all disbursements (other than petty cash) are made by check. -all expenditures are authorized. -the employee who authorizes the payment should write the check. -checks are signed by authorized individuals.

-all disbursements (other than petty cash) are made by check. -all expenditures are authorized. -checks are signed by authorized individuals.

Cash that is restricted and is not available for current use may be reported in the balance sheet as (Select all that apply.) -trading securities. -investments and funds. -accounts receivable. -a noncurrent asset. other assets.

-investments and funds. -a noncurrent asset. -other assets.

Internal control consists of plans to (Select all that apply.) -minimize errors and theft. -report misuse of company assets to investors. -promote operational efficiency. -report management errors to the police. -encourage adherence to company policies and procedures

-minimize errors and theft -promote operational efficiency -encourage adherence to company policies and procedures

Which of the following items are classified as receivables? (Select all that apply.)

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