ACCT 2013 chap 5 smartbook

A sales return occurs when a customer returns a product for a full refund, whereas a sales _____ is when the customer keeps the product and obtains a partial refund.

allowance

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

not be counted in assets of the company.

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

note receivable

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

sales discount

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

sales return

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

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

Green Company has net credit sales of $100,000, an asset turnover ratio of 4, and a receivables turnover ratio of 9. What is the average collection period? 40.6 days 11.1 days 36 days 25 days

40.6 days (365/receivables turnover(9))

A calendar-year-end company that accepts a 3-month interest-bearing note on December 1 must accrue _____ revenue on December 31

A calendar-year-end company that accepts a 3-month interest-bearing note on December 1 must accrue revenue on December 31

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 adjust bad debt expense. An entry to adjust net sales and an entry to adjust bad debt expense. An entry to record payment and an entry to record bad debt expense. An entry to reinstate the account receivable and an entry to record payment

An entry to reinstate the account receivable and an entry to record payment.

When an account previously written off is collected in full, the entry to reverse the previous write-off would require which of the following? (select all that apply) Credit Accounts Receivable. Debit Accounts Receivable. Debit Bad Debt Expense. Credit Allowance for Uncollectible Accounts.

Debit Accounts Receivable. Credit 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? Multiple choice question. Debit Sales Returns; credit Allowance for Uncollectible Accounts. Debit Accounts Receivable; credit Allowance for Sales Returns. Debit Bad Debt Expense; credit Accounts Receivable. Debit Sales Returns; credit Accounts Receivable.

Debit Sales Returns; credit Accounts Receivable.

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? (select all that apply) Debit to Allowance for Uncollectible Accounts Credit Allowance for Uncollectible Accounts Credit to Accounts Receivable Debit Bad Debt Expense

Debit to Allowance for Uncollectible Accounts Credit to Accounts Receivable

The allowance method is required by ______

GAAP

Where is a note receivable reported in the balance sheet? In either current or noncurrent liabilities, as appropriate. In current assets. In either current or noncurrent assets, as appropriate. In noncurrent assets. In noncurrent liabilities, until paid.

In either current or noncurrent assets, as appropriate.

When a company has earned interest in the current period but has not yet recorded the interest, what type of adjustment is the company required to make? Make an adjusting entry at the end of the current period to accrue the interest earned. No adjustment is necessary until the cash is collected. Make an adjusting entry at the end of the the next period to accrue interest earned.

Make an adjusting entry at the end of the current period to accrue the interest earned

Net revenues is calculated as total revenues minus which of the following items? Sales returns Accounts receivable Sales allowances Allowance for uncollectible accounts Sales discounts

Sales returns Sales allowances Sales discounts

The percentage-of-receivables approach to measuring bad debt expense is referred to as ______ method. an equity an expense an income statement a balance sheet

a balance sheet

A trade discount is

a reduction from list price

The percentage-of-receivables method of estimating bad debt applies _____ to _____ various percentages; total sales a single percentage; total sales various percentages; accounts receivable a single percentage; accounts receivable

a single percentage; accounts receivable

A formal, signed credit agreement between a lender and a borrower is called a(n) _____ by the lender.

account receivable

An informal credit arrangement with a customer for payment to be received after the sale is classified as a(n)

account receivable

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

account receivable

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

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

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

allowance for uncollectible accounts

A company that expects that some of its customers will not pay the agreed upon sales price must utilize the Multiple choice question. direct write-off method bad debt method Reason: the correct term is allowance method debt forgiveness method allowance method

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 current asset As a contra account to sales As a noncurrent asset As other comprehensive income

as a non-current asset

With the allowance method, bad debt expense is recorded Multiple choice question. when the customer purchases the goods. at the end of the period when bad debts are estimated. when the account becomes uncollectible. when the customer returns the product.at the end of the period

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

Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to result in the highest net income. be more accurate. result in the lowest net income. recognize bad debts earlier.

be more accurate

Amend Inc. debited Accounts Receivable and credited Allowance for Uncollectible Accounts to reestablish an account previously written off. Amend Inc. should also debit _____ and credit ______.

cash; accounts receivable

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

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

Sales Returns and Sales Allowances are _____ - _____ accounts and require a debit entry to increase the account.

contra revenue

The Sales Returns and Sales Allowances accounts are classified as Multiple choice question. contra equity accounts. contra asset accounts. contra revenue accounts. contra liability accounts.

contra revenue accounts

The Sales Returns and Sales Allowances accounts are classified as contra equity accounts. contra revenue accounts. contra asset accounts. contra liability accounts.

contra revenue accounts

Planters Corp. wrote off a customer's uncollectible account in April. In the following month, Planters collected from the customer in full. The entry to reinstate the account would require a debit to Bad Debt Expense. credit to Accounts Receivable. credit to Allowance for Uncollectible Accounts. debit to Sales Returns and Allowances

credit to Allowance for Uncollectible Accounts.

Shannon determines that a customer account of $10,000 should be written off as uncollectible. The write off of the account will include credit Sales Returns and Allowances. debit Bad Debt Expense. debit Allowance for Uncollectible Accounts. debit Accounts Receivable.

debit Allowance for Uncollectible Accounts.

Adrian Corp. sells goods on account for $100,000 on May 1. The customer paid for the goods on May 10. On May 15, the customer returns $40,000 of the merchandise. The entry Adrian makes on May 15 will include the following: (Select all that apply.) Multiple select question. debit to Sales Returns credit to Accounts Receivable credit to Cash credit to Allowance for Sales Returns debit to Sales Expense

debit to Sales Returns credit to Cash (not credit to accounts receivable bc The customer paid for the goods on May 10. Therefore the customer will receive a cash refund.)

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

decrease in Accounts Receivable

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

The receivables turnover ratio and the average collection period provide information about a company's ability to generate sales effectiveness in managing receivables amount of net credit sales

effectiveness in managing receivables

Gwendolyn uses the allowance method to account for uncollectible receivables. Gwendolyn should record ______ bad debt expense _____. estimated; at the end of the year actual; when accounts are written off estimated; when accounts are written off actual; at the end of the year

estimated; at the end of the year

The formula for calculating interest on a note is

face amount x annual rate x fraction of the annual period

Bad debt expense is reported on the: income statement balance sheet statement of cash flows

income statement

The direct write-off method is required for Multiple choice question. income tax purposes. U.S. GAAP reporting purposes. IFRS reporting purposes.

income tax purposes

An aging schedule classifies accounts receivable based on past experience with customers. customer credit rating. length of time outstanding. size of customer purchase.

length of time outstanding

Total revenues less discounts, returns, and allowances are referred to as _______ revenues

net

When the allowance method is used, the write-off of an uncollectible account: increase to net income decrease to net income no change to net income

no change to net income

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

receivables turnover

Two important ratios that help in understanding a company's effectiveness in managing receivables are the: (select all that apply) receivables turnover ratio average collection period gross receivable ratio receivables profit margin

receivables turnover ratio average collection period

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

The receivables turnover ratio indicates the relationship between sales and cost of goods sold. how efficient the company is at managing sales and inventory. the number of times during a year that the average accounts receivables were collected. the relationship between cash sales and credit sales.

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

Accounts receivable are typically classified as current assets because they are matched with accounts payable for the period. they are a formal agreement to pay within a specific period of time. 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.

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

uncollectible account

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

uncollectible accounts

The direct write-off method is used when bad debts are expected to be material in amount. a company elects to use this method as one of several alternatives. a company expects excessive sales returns. uncollectible accounts are not anticipated or are immaterial

uncollectible accounts are not anticipated or are immaterial.

When the direct write-off method is used, an entry for bad debt expense is required at the end of the year. when the account receivable is determined to be uncollectible. only when bad debts are recorded on the tax return. when each sale is made.

when the account receivable is determined to be uncollectible.

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

credit sales. sales on account.

The journal entry to record bad debt expense includes: (Select all that apply.) debit to bad debt expense credit to allowance for uncollectible accounts credit to bad debt expense debit to allowance for uncollectible accounts

debit to bad debt expense credit to allowance for uncollectible accounts

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

accounts receivable.

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

The estimated expense for accounts that may not be collected is referred to as Multiple choice question. sales discounts. interest expense. accounts receivable. amortization expense. bad debt expense.

bad debt expense

Pixie Inc. writes off a specific accounts receivable. If Pixie is using the allowance method, the write off will Blank______ net income. decrease not affect increase

not affect

Allowance for Uncollectible Accounts has a credit balance because it is a(n) ______ account. contra-asset expense asset contra-revenue liability

contra-asset

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

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. debit to Accounts Receivable $50. credit to Sales Allowances $50. debit to Cash $50.

debit to sales allowance $50

Abby Fashions sells a suit to a customer for $600 on account. The day after the sale, the customer discovers that the jacket has a small stain on the back. Abby Fashions grants the customer a $60 credit. Abby Fashions will record:

debit to sales allowance $60 credit to accounts receivable $60

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