Ch. 8 Learnsmart AC 210

Sequence for 2-year note established that pays interest annually

1. Debit NR and credit Cash 2. Debit Interest Receivable and Credit Interest Rev 3. Debit Cash and Credit Interest Receivable 4. Debit Cash and Credit NR, Interest Receivable, and Interest Rev

The 2 steps required using the allowance method, are to

1. First make an end-of-period adjustment to record the estimated bad debts 2. Later write-off specific customers balances when they are known to be uncollectible

What are 2 advantages of using national credit cards?

1. reduction of bad debts expense 2. avoid lengthy cash collection periods

The entry to record the write-off of a specific customer's account requires a ___

Debit: Allowance for Doubtful Accounts Credit: AR

When using the allowance method, the adjusting entry to record estimated bad debt expense includes a____

Debit: Bad Debt Expense Credit: Allowance for Doubtful Accounts

The correct journal entry for the collection of a NR includes a____

Debit: Cash Credit: NR

The entry to record the collection of $96,000 on a customer's account includes a___

Debit: Cash 96,000 Credit: AR 96,000

Failing to record bad debt expense in the same period as the related revenue violates which principle?

Expense recognition (matching) principle

When will a bankrupt customer's account receivable be eliminated?

When the company records a write-off

Collection of a previously written-off account is called

a recovery

Which of the following accounts are temporary accounts closed (zeroed out) at the end of the accounting period into Retained Earnings? a) allowance for doubtful accounts b) accumulated depreciation c) sales rev d) depreciation expense e) AR f) bad debt expense

c) sales rev d) depreciation expense f) bad debt expense

A contra-asset account, such as Allowance for Doubtful Accounts or Accumulated Depreciation, has a normal balance of a _____ and causes total assets to _____

credit; decrease

The ___ write-off method is not allowed under GAAP

direct

Notes receivables differ from Accounts Receivables in that Notes Receivables

generally charge the borrowers interest from the day they are signed to the day they are collected

Using the aging of AR method, an unadjusted Allowance for Doubtful Accounts will have a debit balance when the amount of write offs recorded during the period is ______ the amount estimated to uncollectible in the prior accounting period

greater than

When a company has earned interest in the current period but has not yet recorded what type of adjustment is the company required to make?

make an adjusting entry at the end of the current period to accrue the interest earned

To be in accordance with GAAP, companies are required to estimate the amount of uncollectible receivables and make an adjusting entry. The effect of an adjusting entry is to __

reduce net income by debiting bad debt expense and reduce net accounts receivable by crediting Allowance for Doubtful Accounts