2301 MGH HW Chapter 5

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

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: (Select all that apply.)

-credit to allowance for uncollectible accounts -debit to bad debt expense

A trade discount is a reduction from the list price, which is used to: (Select all that apply.)

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

Sales to customers in which the customers pay within 30 to 60 days are referred to as (Select all that apply.)

-sales on account. -credit sales.

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

Account receivable

The amount of cash owed to a company by its customers from the sale of goods or services is referred to as

Account receivables

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

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

Cash; Account receivables

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

Credit sales

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 (Reason: Receivables not expected to be collected are not included in assets.)

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

Sales retuen

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

Sales return

The account "Allowance for Uncollectible Accounts" is classified as

a contra asset to accounts receivable.

A trade discount is

a reduction from list price.

The allowance for uncollectible accounts is a contra account to

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. (Enter only one word.)

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

Accounts receivable should be classified as a(n)

asset

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

bad debt

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

be more accurate.

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

contra-asset

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

credit sales.

The income statement approach for estimating bad debts focuses on

current year's credit sales.

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 a(n):

decrease in Accounts Receivable

The receivables turnover ratio and the average collection period provide information about a company's

effectiveness in managing receivables

The formula for calculating interest on a note is

face value x annual rate x fraction of the annual period.

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

has no effect on net income

Using a percentage of each period's net credit sales to estimate bad debt expense is a(n) ------ -------- approach to measuring bad debts. (Enter only one word per blank.)

income statement

The direct write-off method is required for

income tax purposes.

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

interest on a note.

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

not affect

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.

A formal, signed credit agreement between a lender and a borrower is called a(n) Blank______ by the lender. Multiple choice question.

note receivable.

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.