Chapter 5

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

decreases; retained

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

when the account receivable is determined to be uncollectible.

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.

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

bad debt expense.

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

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

contra-asset

The journal entry to record bad debt expense includes: (Select all that apply.)

debit to bad debt expense credit to allowance for uncollectible accounts

Accounts receivable are typically classified as current assets because

they will be converted to cash within 1 year.

Average Collection Period

365/accounts receivable turnover

The account "Allowance for Uncollectible Accounts" normally has a ________ balance

Credit

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?

Debit to Allowance for Uncollectible Accounts Credit to Accounts Receivable

When an account previously written off is collected in full, which is required to ensure the accounting for the complete payment history of the customer?

An entry to reinstate the account receivable and an entry to record payment.

The account "Allowance for Uncollectible Accounts" is classified as

a contra asset to accounts receivable.

Note Receivable

a written promise of a customer to pay the business a sum of money at a future date

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

When writing off an uncollectible account:

total assets are unchanged

Receivable Turnover Ratio Formula

Net credit sales/ average receivables