Ch. 8 Learnsmart AC 210
Sequence for 2-year note established that pays interest annually
1. Debit NR and credit Cash 2. Debit Interest Receivable and Credit Interest Rev 3. Debit Cash and Credit Interest Receivable 4. Debit Cash and Credit NR, Interest Receivable, and Interest Rev
The 2 steps required using the allowance method, are to
1. First make an end-of-period adjustment to record the estimated bad debts 2. Later write-off specific customers balances when they are known to be uncollectible
What are 2 advantages of using national credit cards?
1. reduction of bad debts expense 2. avoid lengthy cash collection periods
The entry to record the write-off of a specific customer's account requires a ___
Debit: Allowance for Doubtful Accounts Credit: AR
When using the allowance method, the adjusting entry to record estimated bad debt expense includes a____
Debit: Bad Debt Expense Credit: Allowance for Doubtful Accounts
The correct journal entry for the collection of a NR includes a____
Debit: Cash Credit: NR
The entry to record the collection of $96,000 on a customer's account includes a___
Debit: Cash 96,000 Credit: AR 96,000
Failing to record bad debt expense in the same period as the related revenue violates which principle?
Expense recognition (matching) principle
When will a bankrupt customer's account receivable be eliminated?
When the company records a write-off
Collection of a previously written-off account is called
a recovery
Which of the following accounts are temporary accounts closed (zeroed out) at the end of the accounting period into Retained Earnings? a) allowance for doubtful accounts b) accumulated depreciation c) sales rev d) depreciation expense e) AR f) bad debt expense
c) sales rev d) depreciation expense f) bad debt expense
A contra-asset account, such as Allowance for Doubtful Accounts or Accumulated Depreciation, has a normal balance of a _____ and causes total assets to _____
credit; decrease
The ___ write-off method is not allowed under GAAP
direct
Notes receivables differ from Accounts Receivables in that Notes Receivables
generally charge the borrowers interest from the day they are signed to the day they are collected
Using the aging of AR method, an unadjusted Allowance for Doubtful Accounts will have a debit balance when the amount of write offs recorded during the period is ______ the amount estimated to uncollectible in the prior accounting period
greater than
When a company has earned interest in the current period but has not yet recorded 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
To be in accordance with GAAP, companies are required to estimate the amount of uncollectible receivables and make an adjusting entry. The effect of an adjusting entry is to __
reduce net income by debiting bad debt expense and reduce net accounts receivable by crediting Allowance for Doubtful Accounts