Accounting- CH 05 Receivables and Sales

Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad debt expense of $1,000. Tudor has an ending balance in the allowance for uncollectible accounts of $2,000. What is the net accounts receivable balance?

$18,000

Prime Corp. has an ending balance in the accounts receivable account of $100,000. Prime recorded bad debt expense of $3,000. Prime has an ending balance in the allowance for uncollectible accounts of $7,000. What is the net accounts receivable balance?

$93,000

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

A debit to Allowance for Uncollectible Accounts.

The allowance method is required by ____

GAAP

What is the formula for the receivables turnover ratio?

Net Credit Sales / Average Accounts Receivable (net)

The receivables turnover ratio indicates

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

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

A(n) ____ ____ is the legal right to receive cash from a credit sale and represents an asset of the company.

account (trade, accounts) receivable (receivable, receivables)

The allowance for uncollectible account is a contra account to

accounts receivable

The allowance for uncollectible accounts is a contra account to

accounts receivable

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

accounts receivable

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

aging (age, ages)

A partial adjustment to the amount owed by the customer for goods that were not returned, but did not fully meet the customer's expectations is referred to as a sales

allowance

To record an estimate for future bad debts at the end of the period, an adjustment would be made with credit to

allowance for uncollectible accounts

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

allowance method

Accounts receivable should be classified as a(n)

asset

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 (uncolectible, uncollectable, nonollectible or noncollectible)

The cost of estimated accounts receivable that will not be collected is referred to as _____ _____ expense.

bad (uncollectible, delinquent) debt (accounts, account)

The estimated expense for accounts that may not be collected is referred to as

bad debt expense

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

balance sheet

Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to

be more accurate

Allowance for Uncollectible Accounts has a credit balance because it is a(n) ____ account

contra asset

The account "Allowance for Uncollectible Accounts" normally has a ____ balance.

credit (CR)

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

A disadvantage to selling on account is

customers do not always pay.

The journal entry to record bad debt expenses includes:

debit to bad debt expense credit to allowance for uncollectible accounts

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 sales allowance ____ the amount owed by the customer for merchandise that is _____ by the customer.

decreases; retained

The Accounts Receivable account is reduced when the seller:

determines that a specific customer account will not be collectible

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

Under the allowance method, companies estimate ____ uncollectible amounts and report those estimates in the ____ year

future; current

Companies extend credit to customers and sell goods on account because

it increases sales

An aging schedule classifies accounts receivable based on

length of time outstanding.

A formal credit arrangement between a creditor and debtor is called a(n)

note receivable

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

note receivable

A trade discount is

percentage reduction from the list price

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

receivables turnover

A cash discount representing a reduction in the amount to be paid by a credit customer if the customer pays within a specified period of time is also referred to as a(n) _____ discount.

sales (cash)

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

sales (sale) return (returns)

Which of the following is a discount in the amount to be paid if the customer pays within a specified time period?

sales discount

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.

Assume Company X is in its fifth year of operation. Analyze the following schedule. What conclusion can be drawn from the following schedule?

the target amount in allowance for uncollectible accounts is $25,500.

Accounts receivable are typically classified as current assets because

they will be converted to cash within 1 year.

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

uncollectible (doubtful, allowance)

The allowance method estimates

uncollectible accounts

The direct write-off method is used when

uncollectible accounts are not anticipated or are immaterial.

When the direct write of method is used, an entry for bad debt expense is required

when the account receivable is determined to be uncollectible.