ACCT 201 SB5

accounts receivable are normally classified

in the balance sheet as assets

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

1. change prices without publishing a new catalog 2. give quantity discounts to customers 3. disguise real prices from competitors

Net revenues is calculated as total revenues minus which of the following items?

1. sales allowances 2. sales discounts 3. sales returns

The two conditions that must exist for a sale and the related receivable to be recognized are

1. the company has provided goods or services to the customer 2. collection from the customer is probable

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 Uncollectible Accounts

Warner Corp. sells goods on account for $10,000 on April 2. On April 20, the customer returns $3,000 of the merchandise. The customer has not yet paid for any of the goods. What is the entry Warner will make on April 20 when the goods are returned?

Debit Sales Returns; credit Accounts Receivable

The percentage-of-receivables approach to measuring bad debt expense is referred to as Blank______ method

a balance sheet

The account "Allowance for Uncollectible Accounts" is classified as

a contra asset to accounts receivable

The percentage-of-receivables method of estimating bad debt applies ______ to ______

a single percentage; 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

aging

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

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

For a typical credit sale, the seller records revenue

at the point of delivery

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

be more accurate

The ratio that shows the approximate number of days the average accounts receivable balance is outstanding is referred to as the average

collection period

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

credit

The account "Allowance for Uncollectible Accounts" normally has a _____ balance

credit

When a business provides services to a customer, and the customer promises to pay later, this is referred to as

credit sales

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

decreases; retained

"Net credit sales" refers to credit sales net of:

discounts allowances returns

The financial statement effects of recording an allowance for estimated sales returns are that:

equity decreases assets decrease net income decreases

At the beginning of the year, Gerta Company's allowance account has a credit balance of $10,000. This may indicate that the

estimate of uncollectible accounts was too high

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

estimate of uncollectible accounts was too low

Gwendolyn uses the allowance method to account for uncollectible receivables. Gwendolyn should record Blank______ bad debt expense Blank___

estimated; at the end of the year

(Face value x annual interest rate x fraction of the annual period) is the formula for

interest on a note

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

sales discount

Sales to customers in which the customers pay within 30 to 60 days are referred to as

sales on account, credit sales

For accounts receivable, the longer an account is outstanding,

the more likely it will prove uncollectible

The average collection period is an estimate of

the number of days the average account receivable balance is outstanding

The receivables turnover ratio indicates

the number of times during a year that the average accounts receivables were collected

With the allowance method, bad debt expense is recorded

when the account becomes uncollectible - The direct write off method records a bad debt when the debt becomes bad

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

The allowance for uncollectible accounts is a contra account to

accounts 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

a(n) _____ is the legal right to receive cash from a credit sale and represents an asset of the company.

accounts receivable

Allowance for Uncollectible Accounts has a credit balance because it is a(n) ______ account

contra-asset

sales returns and sales allowances are ____ accounts and require a debit entry to increase the account

contra-revenue

The journal entry to record bad debt expense includes

credit to allowance for uncollectible accounts debit to bad debt expense

Under the allowance method, companies estimate ______ uncollectible amounts and report those estimates in the ______ year

future; current

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

has no effect on net income

Bad debt expense is reported on the:

income statement

The amount of net credit sales is reported on the _____ _____

income statement

The direct write-off method is required for

income tax purposes

Companies extend credit to customers and sell goods on account because

it increases sales

An aging schedule classifies accounts receivable based on

length of time outstanding

Receivables not expected to be collected should

not be counted in assets of the company

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

note receivable

The Blank______ ratio shows the number of times during a year that the average receivable balance is collected

receivables turnover

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

The allowance method estimates

uncollectible accounts

The direct write-off method is used when

uncollectible accounts are not anticipated or are immaterial