Chapter 5 LearnSmarts
Payment for credit sales/sales on account are typically due in ____ to ____ days
30 ; 60
When a company has earned interest in the current period but has not yet recorded the interest 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
Net revenues refer to...
a company's total revenues less any amounts for discounts, returns, and allowances
sales allowance =
a customer receives partial refund of the sales prices after the customer discovers a flaw in the merchandise. The customer keeps the murchandise
sales return =
a customer returns merchandise purchased during the month and receives a refund of the full sales price
A trade discount =
a percent reduction from list price
For a typical credit sale, the revenue recognition criteria is usually satisfied...
at point of delivery
A customer account that is not expected to be collected is referred to as a(n) _________ debt
bad
The expense associated with the estimate of the amount of accounts receivable that may not be collected during the year is referred to as __________ ____________ expense
bad debt
Compared to other methods of estimating accounts, the aging of accounts receivables method tends to...
be more accurate
The account sales returns and allowances account is a(n) ___________ __________ account and requires a ________ entry to increase the account
contra, revenue, debit
A _________ balance before adjustment indicates that the estimate of uncollectible accounts at the beginning of the year may have been too high
credit
Accounts receivable should be classified as a __________ __________.
current asset
Notes receivable normally has a ________ balance because it is classified as a(n) ________.
debit asset
When an account previously written off is collected in full the entry to reinstate the account would require which of the following?
debit to accounts receivable credit to allowance for uncollectible accounts
The journal entry to record bad debt expense includes
debit to bad debt expense credit to allowance for uncollectible accounts
A sales allowance _____ the amount owed by the customer for merchandise that is ______ by the customer
decreases; retained
A trade discount is a reduction from the list price which is used to
disguise real prices from competitors give quantity discounts to customers' change prices without publishing a new catalog
Adjusting for estimates of future uncollectible accounts matches ____________ in the same period as the ____________ they help to generate
expenses; revenues
the formula for calculating interest on a note is =
face value x annual rate x fraction of the annual period
notes receivable =
formal credit arrangement between borrower and lender
Where is a note receivable reported in the balance sheet?
in either current or concurrent assets as appropriate
The financial statement effects of recording an allowance for estimated sales returns are that:
income decreases, assets decrease, and equity decreases
Bad debt expense is reported on the ___________ ____________ and classified as a(n) ___________ ___________.
income statement operating expense
What may be the result of extending payment periods?
increased gross sales greater required investment in receivables
accounts receivable =
informal credit agreement with trade customers
A ___________ receivable typically yields interest revenue and possesses a fairly high probability of collectibility
notes
Two entries are required when a previously written off account is paid. These two entries include:
reinstate the accounts receivable record the collection on the account receivable
A sales discount is a contra ________ account
revenue
What is considered receivable?
tax refund claims, interest receivable, and loans by the company to other entities
Accounts receivable are normally classified in:
the balance sheet as current assets
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