A201 CH 5

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

contra-asset account

York Inc. records a year-end adjustment for estimated sales returns and allowances. As a result of this entry, York's financial statements will change as follows:

-assets decrease -equity decreases

A company makes a sale on terms 2/10, n/30. What does this mean?

-The customer may take a 2% discount off the price if paid within 10 days. -If payment is not made in 10 days, the net amount is due in 30 days.

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

-debit to Sales Returns -credit to Cash

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

-sales on account -credit sales

When an account previously written off is collected in full, the entry to reverse the previous write-off would require which of the following?

Credit Allowance for Uncollectible Accounts. Debit Accounts Receivable.

On March 5, Oak Corp. provided services on account to Pine. Oak agreed to accept a $100,000, 8%, 6-month interest-bearing note from Pine in payment for the services. The entry required on Oak's books on March 5 would require which of the following entries?

Debit Notes Receivable $100,000; credit Service Revenue $100,000

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

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 Receivables not expected to be collected are not included in assets

The percentage-of-receivables approach to measuring bad debt expense is referred to as _____ method

a balance sheet

The percentage-of-receivables method of estimating bad debt applies ____ to _____

a single percentage; accounts receivable

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

account receivable

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

With the allowance method, bad debt expense is recorded

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

The formula to compute the receivables turnover ratio is net credit sales divided by

average accounts receivable.

The account "Allowance for Uncollectible Accounts" normally has a

credit balance

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

credit to Allowance for Uncollectible Accounts

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

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 Allowances $60 credit to accounts receivable $60

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

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

sales return

A(n) __________ account, Incorrect Unavailable receivable typically yields interest revenue and possesses a fairly high probability of collectibility.

note

What is the formula for the receivables turnover ratio?

Net credit sales divided by average accounts receivable (net)

At the beginning of the year, Gerta Company's allowance account has a credit balance of $10,000. This may indicate that the

estimate of uncollectible accounts was too high

At the beginning of the year, Blocker Company's allowance account has a debit balance of $10,000. This may indicate that the

estimate of uncollectible accounts was too low

Gwendolyn uses the allowance method to account for uncollectible receivables. Gwendolyn should record _____ bad debt expense ______.

estimated; at the end of the year

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

not affect

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

increases; returned

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

net revenue