Accounting Chapter 5

Accounts receivable are normally reported at the:

Amount expected to be collected

The percentage-of-credit-sales method for estimating uncollectible accounts is sometimes described as:

The Income Statement Method

The percentage-of-receivables method for estimating uncollectible accounts is sometimes described as:

The balance sheet method

The receivables turnover ratio indicates:

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

The purpose of recording an allowance for uncollectible accounts is to:

The purpose of recording an allowance for uncollectible accounts is to:

The direct write-off method is an acceptable method for what purpose?

Tax reporting

The formula for average collection period is:

365 days divided by the receivable turnover ratio.

When $2,500 of accounts receivable are determined to be uncollectible, which of the following should the company record to write off the accounts using the allowance method?

A debit to Allowance for Uncollectible Accounts and a credit to Accounts Receivable.

The primary difference between a note receivable and an account receivable is:

A note receivable is evidenced by a written debt instrument.

Collections of accounts receivable that previously have been written off are credited to:

Accounts Receivable

Informal credit arrangements with trade customers.

Accounts Receivable

When a company provides services on account, the transaction would be recorded with a debit to

Accounts Receivable

The amount of cash owed to a company by its customers from the sale of goods or services on account it commonly referred to as

Accounts receivable

The method of estimating uncollectible accounts based on the length of time the amount is owed by the customer is referred to as the:

Aging method

Which of the following amounts would be used to calculate net revenues for the current year?

All of the other answers are correct

When a company provides services on account, the transaction would be recorded with a credit to

Service revenue

A note receivable is reported in the balance sheet:

As either a current asset or long-term asset depending on the expected collection date.

Account to debit when receivables and interest are collected.

Cash

Accounts with balances opposite of revenue.

Contra Revenues

The account "Allowance for Uncollectible Accounts" is classified as a(n):

Contra asset to accounts receivable in the balance sheet.

The income statement method for estimating bad debts uses a percentage of:

Credit Sales

The normal balance of the account "Allowance for Uncollectible Accounts" is a ________ because ________.

Credit; it is a contra account to Accounts Receivable (a debit account)

Oswego Clay Pipe Company provides services of $46,000 to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. What would Oswego record on April 12?

Debit Accounts Receivable $46000, Credit Sales Revenue $46000

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. How would Flores record the sale on November 10?

Debit Accounts Receivable $8000, Credit Sales Revenue $8000

Oswego Clay Pipe Company provides services of $46,000 to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. What would Oswego record on April 23, assuming the customer made the correct payment on that date?

Debit Cash $45540 & Sales Discount $460, Credit Accounts Receivable $46000

Oswego Clay Pipe Company provides services of $46,000 to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. What would Oswego record on June 10, assuming the customer made the correct payment on that date?

Debit Cash $46000, Credit Accounts Receivable $46000

On November 10 of the current year, Flores Mills provides services to a customer for $8,000 with credit terms 2/10, n/30. The customer made the correct payment on November 17. How would Flores record the collection of cash on November 17?

Debit Cash $7840 & Sales Discount $160, Credit Accounts Receivable $8000

On November 10 of the current year, Flores Mills provides services to a customer for $8,000 with credit terms 2/10, n/30. The customer made the correct payment on December 5. How would Flores record the collection of cash on December 5?

Debit Cash $8000, Credit Accounts Receivable $8000

On July 8, Ray Inc. sold 100 printers to Office Rental Company at $600 each and offered a 2% discount for payment within 10 days. On July 15, Office Rental Company paid the full amount in cash. What should Ray Inc. record on July 15?

Debit cash $58,800 & Sales Discount $1200, Credit Accounts Receivable $60000

Barton Health Services provided care to a patient worth $1,200. Because the patient was over the age of 65, Barton granted the patient a 20% discount and the customer paid the correct amount in cash. How would Barton record the service transaction?

Debit cash $960, credit Service Revenue $960

A company's adjustment for uncollectible accounts at year-end would include a:

Debit to Bad Debt Expense

Hughes Aircraft sold a four-passenger airplane for $380,000, accepting a 12% note for the purchase price. This transaction would include a:

Debit to notes receivable

Credit sales are recorded as

Debt Accounts Receivable, credit Service Revenue

On February 1, 2021, Sanger Corp. lends cash and accepts a $2,000 note receivable that offers 10% interest and is due in six months. What would Sanger record on August 1, 2021, when the borrower pays Sanger the correct amount owed?

Debt Cash $2100, Credit Interest Revenue $100 & Notes Receivable $2000

Identify the primary disadvantage of extending credit to customers

Delay or failure to collect cash

Which method is NOT allowed under Generally Accepted Accounting Principles for the purpose of accounting for uncollectible accounts?

Direct write-off method

Which of the following best describes credit sales?

Sales to customers on account

Identify the likely advantage of extending credit to customers

Increased sales

Account to debit when interest accrues at the end of the year.

Interest Receivable

Account to credit when interest accrues at the end of the year.

Interest Revenue

For accounts receivable, the longer an account is outstanding, the:

More likely it will prove uncollectible

Total revenues less contra revenues.

Net Revenues

The percentage-of-receivables method for accounting for uncollectible accounts focuses on the:

Net amount of cash expected to be collected

The formula for the receivables turnover ratio is:

Net credit sales divided by average accounts receivable.

Suppose a customer is unable to pay its account on time, so the company accepts a six-month interest-bearing note receivable to replace the customer's account receivable. What effect will accepting the note receivable have on the company's financial statements at the time of acceptance?

No change in total assets

Formal signed credit arrangements between a creditor and a debtor.

Notes Receivable

A trade discount results in

Revenue being recorded for the discounted price.

Gershwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. The price reduction is an example of a:

Sales Allowance

Reduction in revenue because of some deficiency in the company's good or service.

Sales Allowances

Reduction in revenue when the customer pays within a specified period.

Sales Discounts

Tom's Textiles shipped the wrong material to a customer, who refused to accept the order. This is an example of a:

Sales Return

Reduction in revenue because the customer brings back products to the company after the original purchase.

Sales Returns

Tom's Textiles shipped the wrong material to a customer, who refused to accept the order. Upon receipt of the material, Tom's Textiles would credit Accounts Receivable and debit:

Sales Returns

When customers purchase goods on account, Spitz Manufacturing offers them a 2% reduction in the amount owed if they pay within 10 days. This is an example of a:

Sales discount

Which accounting concept does the direct write-off method violate?

Timeliness in recognizing uncollectible accounts.

Reduction in revenue because the product or service is sold below the listed price.

Trade Discounts

The direct write-off method is used when:

Uncollectible accounts are not anticipated or are immaterial.