accounting test 9 and 10

At the beginning of the year, the balance in Allowance for Doubtful Accounts is a credit of $760. During the year, $120 of previously written off accounts are reinstated and accounts totaling $740 are written-off as uncollectible. The end-of-year balance (before adjustment) in Allowance for Doubtful Accounts should be

140

Receivables

All money claims against other entities including people, business firms, and other orgs.

Which statement is not true?

All receivables that are expected to be realized in cash beyond 265 days are reported in the non-current assets section.

If the allowance method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible?

Allowance for Doubtful Accounts

Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct regarding the entry to record estimated uncollectible receivables?

Allowance for Doubtful Accounts will be credited

Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific receivable previously written off would include a

debit to Accounts Receivable

Selling receivables is called

factoring

A debit balance in the Allowance for Doubtful Accounts

indicates that actual bad debt write-offs have exceeded previous provisions for bad debts

The formula for depreciable cost is

Initial cost - Residual value

Which of the following is included in the cost of constructing a building

Insurance costs during construction

An asset was purchased for $120,000 on January 1, Year 1 and originally estimated to have a useful life of 10 years with a residual value of $10,000. At the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. Calculate the third-year depreciation expense using the revised amounts and straight-line method.

24000

Given the following information, compute accounts receivable turnover: Gross sales $150,000 Accounts receivable, beginning of year $18,000 Sales 135,000 Accounts receivable, end of year 22,000

6.75

The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:

750

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and bad debt expense is estimated at 3% of net credit sales. If net credit sales are $300,000, the amount of the adjusting entry to record the estimated uncollectible accounts receivables is

9000

Accounts Receivable

A claim against the customer created by selling merchandise or services on credit

notes receivable

A customers written promise to pay an amount and possibly interest at an agreed upon rate

accelerated depreciation method

A depreciation method that provides for a higher depreciation amount in the first year of the assets use, followed by a gradually declining amount of depreciation

Operating lease

A lease that does not meet the criteria for capital leases and thus is accounted for as an operating expense

Units of output method

A method of depreciation that provides for a depreciation expense based on the expected productive capacity for a fixed asset

straight line method

A method of depreciation that provides for equal periodic depreciation expense over the estimated life of a fixed asset

Double declining balance method

A method of depreciation that provides periodic depreciation expense based on the declining book value of a fixed asset over its estimated life.

Trademark

A name, term, or symbol used to identify a business and its products

Dishonered note receivable

A note that the maker fails to pay on the due date

Copyright

An exclusive right to publish and sell a literary artistic or musical composition

Goodwill

An intangible asset that is created from such favorable factors as location, product quality, reputation, and managerial skill.

Fixed assets are ordinarily presented on the balance sheet

At a cost less accumulated depreciation

Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?

Bad Debt Expense 17,000 Allowance for Doubtful Accounts 17,000

When a company uses the allowance method of accounting for uncollectible receivables, which entry would not be found in the general journal?

Bad Debt Expense 500 Accounts Receivable, Bob Smith 500

Revenue expenditures

Costs that benefit only the current period or costs incurred for normal maintenance and repairs of fixed assets

The depreciation method that does not use residual value in calculating the first years depreciation expense is

Double declining balance

Patents

Exclusive rights to produce and sell goods with one or more unique features

intangible assets

Long term assets that are useful in the operations of a business are not held for sale and are without physical qualities

Fixed assets or plant assets

Long term or relatively permanent tangible assets such as equipment machinery, and buildings that are used in normal business operations and that depreciate over time

Residual value is also known as all of the following except

Net book value

The proper journal entry to purchase a computer costing 975 on account to be utilized within the business would be

Office equipment 975 accounts payable 975

Boot

The amount a buyer owes a seller when a fixed asset is traded in on a similar asset

Trade in allowance

The amount a seller allows a buyer for a fixed asset that is traded in for a similar asset

Maturity value

The amount that is due at the maturity or due date of a note.

Allowance for doubtful accounts

The contra asset account for accounts receivable

capital expenditures

The costs of acquiring fixed assets, adding to a fixed asset, improving a fixed asset, or extending a fixed assets useful life.

Net realizable value

The estimated selling price of an item of inventory less any direct costs of disposal such as sales commissions

Residual Value

The estimated value of a fixed asset at the end of its useful life

Allowance method

The method of accounting for uncollectible accounts that provides an expense for uncollectible receivables in advance of their write off

direct write off method

The method of accounting for uncollectible accounts that recognizes the expense only when accounts are judged to be worthless

Fixed asset turnover ratio

The number of dollars of sales that are generated from each dollar of average fixed assets during the year computed by dividing the sales by the average net fixed assets

bad debt expense

The operating expense incurred because of the failure to collect receivables.

Aging the receivables

The process of analyzing the accounts receivable and classifying them according to various age groupings, with the due date being the base point for determining age

Depletion

The process of transferring the Cody of natural resources to an expense account

Accounts Receivable turnover

The relationship between net sales and accounts receivable computed by dividing the net sales. By the average net accounts receivable measures how frequently during the year the accounts receivable are being converted to cash.

Number of days sales in receivables

The relationship between sales and accounts receivable computed by dividing the net accounts receivable at the end of the year by average daily sales.

Depreciation

The systematic periodic transfer of the cost of a fixed asset i an expense account during its expected useful life.

Jefferson uses the percent of method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct?

Uncollectible accounts are estimated to be $111,000.

The process of transferring the cost of an asset to an expense account is called all of the following except

allocation

Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year (before adjustment), and an analysis of accounts in the customers ledger indicates uncollectible receivables of $13,000. Which of the following entries records the proper adjusting entry for bad debt expense?

debit Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600

When a company receives an interest-bearing note receivable, it will

debit Notes Receivable for the face value of the note

An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals $6,400. If Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad debt expense for the period will require a

debit to Bad Debt Expense for $7,700

The two methods of accounting for uncollectible receivables are the allowance method and the

direct write-off method

Two methods of accounting for uncollectible accounts are the

direct write-off method and the allowance method

If collection of an other receivable is expected beyond one year, it is classified as a(n)

investment under noncurrent assets

The amount of the promissory note plus the interest earned on the due date is called the

maturity value

Factors contributing to a decline in the usefulness of a fixed asset may be divided into the following two categories

physical and functional

Which of the following should be included in the acquisition cost of a piece of equipment?

testing costs prior to placing the equipment into production installation costs transportation costs All of these choices are correct.

Book Value

the cost of a fixed asset minus accumulated depreciation on the asset

When referring to a note receivable or promissory note

the note may be used to settle an accounts receivable

Amortization

the periodic transfer of the cost of an intangible asset to expense

A company uses the allowance method to account for uncollectible accounts receivables. When the firm writes off a specific customer's account receivable

there is no effect on total current assets or total expenses

On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the

total estimated uncollectible accounts as of the end of the year