CH.5 pre assignment

The allowance method estimates

uncollectible accounts

The journal entry to record bad debt expense includes:

debit to bad debt expense credit to allowance for uncollectible accounts

A trade discount is

a percentage reduction from list price.

The approach that considers the age of various accounts receivables to estimate uncollectible accounts is referred to as the _______ method of accounts receivable.

aging

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

credit sales sales on account

The account "Allowance for Uncollectible Accounts" normally has a

credit

Receivables not expected to be collected should

not be counted in assets of the company.

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 cost of estimated accounts receivable that will not be collected is referred to as __________expense.

bad debit

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

contra-asset

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

sales return

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

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

sales discount

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

sales return

The direct write-off method is required for

income tax purposes.

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?

$93,000 100,000-7,000

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

future; current

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 20,000-2,000

The allowance method is required by __________.

GAAP

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

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

The allowance for uncollectible accounts is a contra account to

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

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

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):

decrease in Accounts Receivable

A sales allowance ____ the amount owed by the customer for merchandise that is _____ by the customer.

decreases; retained

Using a percentage of each period's net credit sales to estimate bad debt expense is a(n) _______.

income statement

Two entries are required when a previously written off account is collected. These two entries include:

reinstate the account receivable record the collection on the account receivable

The estimated expense for accounts that may not be collected is referred to as

bad debt expense.

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

be more accurate

The income statement approach for estimating bad debts focuses on

current year's credit sales.

Shannon Corp. uses the aging method to account for bad debt expense. 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.

The Accounts Receivable account is reduced when the seller:

determines that a specific customer account will not be collectible

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

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

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

has no effect on net income

Pixie Inc. writes off a specific accounts receivable. If Pixie is using the allowance method, the write off will _____ net income.

not affect

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

note receivable

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

note receivable

The direct write-off method is used when

uncollectible accounts are not anticipated or are immaterial

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.

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

False

Where is a note receivable reported in the balance sheet?

In either current or noncurrent assets, as appropriate.

The account "Allowance for Uncollectible Accounts" is classified as

a contra asset to accounts receivable.

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.

cash

Accounts receivable should be classified as a(n)

asset.

Accounts receivable are typically classified as current assets because

they will be converted to cash within 1 year.

The income statement approach for estimating bad debts uses a percentage of

credit sales.

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

credit sales.

Joyce Corp. uses the percentage-of-receivables method to account for bad debt expense. 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 Uncollected accounts