Principles of Financial Accounting Chpt 8

The Allowance for Bad Debts account has a credit balance of $8,700 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of-receivables method, the company's management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for Bad Debts reported on the balance sheet?

$15,000

A company issues a 60-day, 13% note for $16,000. What is the principal amount of the note? (Round your answer to the nearest dollar.)

$16,000

A company reports net accounts receivable of $152,000 on its December 31, 2017 balance sheet. The Allowance for Bad Debts has a credit balance of $16,000. What is the balance of Accounts Receivable?

$168,000

Accounts Receivable has a balance of $4,000, and the Allowance for Bad Debts has a credit balance of $400. The allowance method is used. What is the net realizable value of Accounts Receivable after a $160 account receivable is written off?

$3,600

On July 7, Landview Bank lent $530,000 to Classical Music Shop on a 60 day, 4% note. What is the maturity value of the note? (Use a 360-day year and round answers to the nearest dollar.)

$533,533

A debtor is a party to a credit transaction who will receive the cash for the transaction at a later date

False

Which of the following is a weak internal control over cash collections from receivables?

In order to avoid losing sales, all customers' credit applications should be approved.

Which of the following statements is true of the direct write-off method?

It is only suitable for small companies that have very few uncollectible receivables.

Which of the following is true of the balance sheet presentation on of the Allowance for Bad Debts?

It is shown as a contra account related to accounts receivable.

Which of the following is a disadvantage when a business accepts credit cards or debit cards from customers?

The business pays a processing fee

An organization's receivables can be categorized into accounts receivable, notes receivable, and other receivables.

True

Under the direct write-off method, the entry to write off an uncollectible account will include

a debit to Bad Debts Expense account

Under the direct write-off method, the entry to write off an uncollectible account will include ________.

a debit to Bad Debts Expense account

Which of the following is included in the numerator of the acid-test ratio?

cash including cash equivalents, short-term investments, net current receivables

When a company is using the direct write-off method, and an account is written off, the journal entry consists of a ________.

credit to Accounts Receivable and a debit to Bad Debts Expense

Which of the following is included in the category of other receivables?

interest receivable

For a company with significant uncollectible receivables, the direct write-off method is unsuitable because ________.

it violates the matching principle

The entiy that signs the promissory note and promises to pay the required amount is the ________.

maker of the note

Which of the following is an example of exercising internal control over receivables?

separating cash collection and credit approval duties

The two methods of estimating uncollectible receivables are the:

the aging-of-accounts-receivable method and the percent-of-sales method

The two methods of accounting for uncollectible receivables are ________.

the allowance method and the direct write-off method

When a company uses the allowance method to measure bad debts, ________.

the amount of bad debts expense is es$mated at the end of the accoun$ng period

When a company uses the allowance method to measure bad debts, ________.

the amount of bad debts expense is estimated at the end of the accounting period

When a company uses the allowance method to measure bad debts, ________.

the amount of bad debts expense is estimated at the end of the accounting period

Grabbe Enterprises uses the allowance method to account for uncollectible receivables. When an uncollectible account is written off, ________.

the write off has no effect on net income

When using the allowance method, after a company has previously written off an account, ________.

when a customer pays on an account that has been written off, the company needs to reverse the write-off to the Allowance for Bad Debts account and then record the receipt of cash