BUAD Chapter 5 Review
The allowance for uncollectible accounts is a contra account t
accounts receivable
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
The allowance for uncollectible accounts is a contra account to
Accounts Recievable
Using a percentage of each period's net credit sales to estimate bad debt expense is a(n) _____________ ____________ approach to measuring bad debts.
Income Statement
a formal, signed credit agreement between a lender and a borrower is called a(n) _________ by the lender
Note Receivable
The ___________ ratio shows the number of times during a year that the average receivable balance is collected.
Receivables Turnover
The amount of cash owed to a company by its customers from the sale of goods or services is referred to as
accounts receivable.
Accounts receivable are typically classified as current assets because
they will be converted to cash within 1 year.
An informal credit arrangement with a customer for payment to be received after the sale is classified as a(n)
account receivable.
The allowance for uncollectible accounts is a contra account to
accounts recievable
The income statement approach for estimating bad debts focuses on
current year's credit sales.
Companies extend credit to customers and sell goods on account because
it increases sales.
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 trade discount is
a percentage reduction from list price.
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
The Accounts Receivable account is reduced when the seller:
Determines that a specific customer account will not be collectible.
The allowance method is required by_____________.
GAAP
The direct write-off method is required for
Income Tax Purposes
When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a(n)
Sales and Returns
Under the allowance method, companies estimate __________ uncollectible amounts and report those estimates in the _________ year.
future; current
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.
The direct write-off method is used when
uncollectible accounts are not anticipated or are immaterial.
The allowance method estimates
uncollectible accounts.
A customer account that is not expected to be collected is referred to as a bad debt or _________________ account.
uncollectible, doubtful, or allowance
The estimated expense for accounts that may not be collected is referred to as
Bad debt expense
Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to
Be more accurate
Accounts receivable should be classified as a(n)
Asset
An aging schedule classifies accounts receivable based on
Length of time outstanding
What is the formula for the receivables turnover ratio?
Net credit sales divided by average accounts receivable (net).
The receivables turnover ratio indicates
The number of times during a year that the average accounts receivables were collected.
The percentage-of-receivables approach to measuring bad debt expense is referred to as ________ method.
a Balance Sheet
The approach that considers the age of various accounts receivables to estimate uncollectible accounts is referred to as the _______________ method of accounts receivable.
aging
A company that expects that some of its customers will not pay the agreed upon sales price must utilize the
allowance method
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, uncollectible, uncollectable, noncollectable, or noncollectible
A trade discount is a reduction from the list price, which is used to:
change prices without publishing a new catalog disguise real prices from competitors give quantity discounts to customers
The income statement approach for estimating bad debts uses a percentage of
credit sales
The journal entry to record bad debt expense includes
credit to allowance for uncollectible accounts debit to bad debt expense
A disadvantage to selling on account is
customers do not always pay.
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
debit Allowance for Uncollectible Accounts.
