Chapter 5 Study Set

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

Not affect

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

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

Sales on account Credit sales

The account "Allowance for Uncollectible Accounts" is classified as

A contra asset to accounts receivable

A trade discount is

A percentage reduction from list price

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

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

Allowance for Uncollectible Accounts has a credit balance because it is a

Contra-asset account

The account "Allowance for Uncollectible Accounts" normally has a

Credit balance

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

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?

Debit to Allowance for Uncollectible Accounts Credit to Accounts Receivable

The journal entry to record bad debt expense includes:

Debit to bad debt expense Credit to allowance for uncollectible accounts

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

The direct write-off method is required for

Income tax purposes

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

Note receivable

A formal, signed credit agreement between a lender and a borrower is called a ___ by the lender

Note receivable

Accounts receivable are typically classified as current assets because

They will be converted to cash within 1 year

The allowance method estimates

Uncollectible accounts

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.

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

aging

Accounts receivable should be classified as an

asset

Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad debt expenses 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

When an account previously written off is collected in full, which is required to ensure the account for the complete payment history of the customer?

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

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

Where is a note receivable reported in the balance sheet?

In either current or noncurrent assets, as appropriate

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

Give quantity discounts to customers Change prices without publishing a new catalog Disguise real prices from competitors

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

Not affect

The allowance method is required by

GAAP

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

Decreases; retained

The Accounts Receivable account is reduced when the seller:

Determines that a specific customer account will not be collectible

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

Credit sales

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

Bad debt

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

Account 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

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 account 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

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 an

Decrease in Accounts Receivable

When the account receivable is determined to be uncollectible. 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 an

Decrease in Accounts Receivable

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

Decreases; retained

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

Has no effect on net income

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

Sales allowance

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

Sales discount

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

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

Sales return

Prime Corp. has an ending balance in the accounts receivable account of $100,000. Prime recorded a 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

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