BUAD Chapter 5 Review

The allowance for uncollectible accounts is a contra account t

accounts receivable

The account "Allowance for Uncollectible Accounts" is classified as

A contra asset to accounts receivable

The percentage-of-receivables method of estimating bad debt applies _______________ to ____________.

A single percentage; accounts receivable

The allowance for uncollectible accounts is a contra account to

Accounts Recievable

Using a percentage of each period's net credit sales to estimate bad debt expense is a(n) _____________ ____________ approach to measuring bad debts.

Income Statement

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

Note Receivable

The ___________ ratio shows the number of times during a year that the average receivable balance is collected.

Receivables Turnover

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

accounts receivable.

Accounts receivable are typically classified as current assets because

they will be converted to cash within 1 year.

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

account receivable.

The allowance for uncollectible accounts is a contra account to

accounts recievable

The income statement approach for estimating bad debts focuses on

current year's credit sales.

Companies extend credit to customers and sell goods on account because

it increases sales.

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 trade discount is

a percentage reduction from list price.

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 uncollectible accounts

The Accounts Receivable account is reduced when the seller:

Determines that a specific customer account will not be collectible.

The allowance method is required by_____________.

GAAP

The direct write-off method is required for

Income Tax Purposes

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

Sales and Returns

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

future; current

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

sales return

For accounts receivable, the longer an account is outstanding,

the more likely it will prove uncollectible.

The direct write-off method is used when

uncollectible accounts are not anticipated or are immaterial.

The allowance method estimates

uncollectible accounts.

A customer account that is not expected to be collected is referred to as a bad debt or _________________ account.

uncollectible, doubtful, or allowance

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

Accounts receivable should be classified as a(n)

Asset

An aging schedule classifies accounts receivable based on

Length of time outstanding

What is the formula for the receivables turnover ratio?

Net credit sales divided by average accounts receivable (net).

The receivables turnover ratio indicates

The number of times during a year that the average accounts receivables were collected.

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

a Balance Sheet

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

aging

A company that expects that some of its customers will not pay the agreed upon sales price must utilize the

allowance method

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

average accounts receivable.

A customer account that is not expected to be collected is referred to as a(n)______________ debt.

bad, uncollectible, uncollectable, noncollectable, or noncollectible

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

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

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

credit sales

The journal entry to record bad debt expense includes

credit to allowance for uncollectible accounts debit to bad debt expense

A disadvantage to selling on account is

customers do not always pay.

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.