Accounts Receivable

b. allowance for doubtful accounts

Collection of accounts receivable previously written off results in an increase in cash and an increase in a. accounts receivable b. allowance for doubtful accounts c. bad debt expense d. retained earnings

c. may occur before the year-end adjustment for uncollectible accounts

A debit balance in the allowance for doubtful accounts a. should never occur b. is always the result of management not providing a large enough allowance in order to manage earnings c. may occur before the year-end adjustment for uncollectible accounts d. may exist even after the year-end adjustment for uncollectible accounts

c. credit sales

A method of estimating bad debts that focuses on the income statement rather than the statement of financial position is the allowance method based on a. direct write-off b. aging the trade accounts receivable c. credit sales d. trade accounts receivables

a. aging of accounts receivable

A method of estimating uncollectible accounts that emphasizes asset valuation rather than income measurement is the allowance method based on a. aging of accounts receivable b. direct write-off c. gross sales d. credit sales less return and allowances

c. expected amount to be received

Accounts receivable should normally be reported at a. present value of future cash receipts b. current value plus accrued interest c. expected amount to be received d. current value less expected collection cost

c. cash discounts under the net method

All of the following are problems associated with the measurement of accounts receivable, except? a. uncollectible accounts b. returns c. cash discounts under the net method d. allowance granted

c. increase in allowance for doubtful accounts and no effect on doubtful accounts expense

An entity uses the allowance method to recognize doubtful accounts expense. What is the effect of a collection of an account previously written off? a. no effect on both allowance for doubtful accounts and doubtful accounts expense b. no effect on allowance for doubtful accounts and decrease in doubtful accounts expense c. increase in allowance for doubtful accounts and no effect on doubtful accounts expense d. increase in allowance for doubtful accounts and decrease in accounts expense

a. current liabilities

Credit balances in accounts receivables are classified as a. current liabilities b. part of accounts payable c. long-term liabilities d. deduction from accounts receivables

a. net method

In recording cash discounts related to accounts receivables which is more theoretically correct? a. net method b. gross method c. allowance method d. all three methods are theoretically correct

c. only the portion currently due is shown as current and the balance as non-current

In the case of long-term real estate installment sales a. the entire receivables are shown as current without disclosure of the amount not currently due b. the entire receivables are shown as non-current c. only the portion currently due is shown as current and the balance as non-current d. the entire receivables are not recorded

d. within one year, the length of the operating cycle notwithstanding

Non-trade receivables are classified as current assets only if reasonably expected to be realized in cash a. within one year or within the operating cycle, whichever is shorter b. within one year or within the operating cycle, whichever is longer c. within the normal operating cycle d. within one year, the length of the operating cycle notwithstanding

c. either as current of non-current depending on the expectation of realizing within one year or over one year

Receivables from subsidiaries are classified as a. current assets b. non-current assets c. either as current of non-current depending on the expectation of realizing within one year or over one year d. partly current and partly non-current

a. gives a reasonably accurate measurement of receivables in the statement of financial position

The advantage of relating the bad debt experience to accounts receivable is that this approach a. gives a reasonably accurate measurement of receivables in the statement of financial position b. related bad debt expense to the period of sales c. is the only generally accepted method for measuring accounts receivable d. makes estimated of uncollectible accounts unnecessary

c. a previously defaulted customer pays the balance

The entry debiting accounts receivables and crediting allowance for doubtful accounts would be made when a. a customer pays an account balance b. a customer defaults on the accounts c. a previously defaulted customer pays the balance d. estimated uncollectible accounts are too low

a. decrease both accounts receivable and the allowance

When the allowance method is used, the entry to record the write-off of a specific account would a. decrease both accounts receivable and the allowance b. decrease accounts receivable and increase allowance c. increase both accounts receivable and the allowance d. increase accounts receivables and decrease the allowance

d. within one year or within the operating cycle whichever is longer

Trade receivables are classified as current assets if reasonably expected to be collected a. within one year b. within the normal operating cycle c. within one year or within the operating cycle whichever is shorter d. within one year or within the operating cycle whichever is longer

d. have no effect on net income

Under the allowance method, the entries at the same time of collection of an accounts previously written off would a. decrease the allowance for doubtful accounts b. increase net income c. have no effect on the allowance for doubtful accounts d. have no effect on net income

a. affects neither net income nor working capital

Under the allowance method, the journal entry to record the write-off of a specific uncollectible accounts a. affects neither net income nor working capital b. affects neither net income nor working accounts receivable c. decreases both net income and working capital d. decreases both net income and accounts receivable

c. no effect under allowance method and decrease under direct write-off method

When a specific customer account receivable is written off as uncollectible, what will be the effect on the net income under the allowance and direct write-off method? a. no effect under both allowance method and direct write-off method b. decrease under both allowance method and direct write-off method c. no effect under allowance method and decrease under direct write-off method d. decrease under allowance method and no effect under direct write-off method

d. is the amount of desired credit balance of the allowance for doubtful accounts to be reported at year end

When an accounts receivable aging schedule is prepared a series of computations is made to determine the estimated uncollectible accounts. The resulting amount from this aging schedule a. when added to the total accounts written off during the year is the desired credit balance of the allowance for doubtful accounts at year-end b. is the amount of doubtful accounts expense for the year c. is the amount that should be added to the beginning allowance for doubtful accounts to get the doubtful accounts expense for the year d. is the amount of desired credit balance of the allowance for doubtful accounts to be reported at year end

a. bad debt expense is measured indirectly and the allowance for uncollectible accounts is measured directly

When an aging approach is used for estimating uncollectible accounts a. bad debt expense is measured indirectly and the allowance for uncollectible accounts is measured directly b. bad debt expense is measured indirectly and the allowance for uncollectible accounts is measured indirectly c. bad debt expense is measured directly and the allowance for uncollectible accounts is measure directly d. bad debts expense is measured directly and the allowance for uncollectible accounts is measured indirectly

a. the entire receivables are classified as current with disclosure of the amount not realizable within one year

Where the operating cycle extends beyond one year because of normal credit terms as in the case of installment sales a. the entire receivables are classified as current with disclosure of the amount not realizable within one year b. the entire receivables are shown as non-current c. the portion due in one year is shown as current and the balance as non current d. the receivables are not recognized

c. matching principle

Which accounting principle primarily supports the use of allowance for doubtful accounts? a. continuity principle b. full disclosure principle c. matching principle d. conservatism

b. a percentage of sales not adjusted for the balance in the allowance

Which is an accurate method of determining the amount of the adjustment to bad debt expense a. a percentage of sales adjusted for the balance in the allowance b. a percentage of sales not adjusted for the balance in the allowance c. a percentage of accounts receivable not adjusted for the balance in the allowance d. an amount derived from aging accounts receivable and not adjusted for the balance in the allowance

c. direct write-off method

Which is not permitted in accounting for uncollectible accounts receivable? a. percentage of accounts receivable b. percentage of sals c. direct write-off method d. aging of accounts receivable

d. write-off of accounts receivables

Which is recorded by a credit to accounts receivable? a. sale of inventory on account b. estimating the allowance for uncollectible accounts c. estimating annual sales returns d. write-off of accounts receivables

a. allowance method

Which method of recording bad debt loss is consistent with accrual accounting? a. allowance method b. direct write-off method c. percent of sales method d. percent of accounts receivable method

c. bad debt expense adjusting entry

Which of the following does not change the balance in accounts receivable? a. return on credit sales b. collection from customers c. bad debt expense adjusting entry d. write-off

d. sales on account

Which should be recorded in the accounts receivables? a. receivables from officers b. receivables from subsidiaries c. dividend receivable d. sales on account

d. improved matching of bad debt expense with revenue

Why is the allowance method preferred over the direct write-off method of accounting for bad debts? a. allowance method is used for tax purposes b. estimates are used c. determining worthless accounts under direct write-off method is difficult to do d. improved matching of bad debt expense with revenue