chapter 5

sales discount

A cash discount representing a reduction in the amount to be paid by a credit customer if the customer pays within a specific period of time.

allowance method

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

Bad debt

A customer account that is not expected to be collected.

Note Receivable

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

decrease; retained

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

Change prices without publishing a new catalog give quantity discounts to customers disguise real prices from competitors

A trade discount is a reduction from the list price, which is used to

they will be converted to cash within 1 year.

Accounts receivable are typically classified as current assets because

asset

Accounts receivable should be classified as an

contra-asset

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

sales allowances, discounts, and returns

Net revenues is calculated as total revenue minus

93,000

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?

determines that a specific customer account will not be collectible

The Accounts Receivable account is reduced when the seller:

a contra asset to accounts receivable.

The account "Allowance for Uncollectible Accounts" is classified as

credit balance

The account "Allowance for Uncollectible Accounts" normally has a balance. (Enter only one word.)

Accounts Receivable

The allowance for uncollectible accounts is a contra account to

uncollectible accounts

The allowance method estimates

aging

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

bad debt

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

Credit to allowance for uncollectible accounts debit to bad debt expense

The journal entry to record bad debt expense include.

allowance for uncollectible accounts

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

False

True or false: Accounts receivable not expected to be collected should be counted in the assets of the company until they are later written off.

18,000 accounts receivable - uncollectible accounts

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?

future, current

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

NO effect on NET INCOME

When the allowance method is used, the write-off of an uncollectible account:

sales discount

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

allowance or uncollectible

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

allowance

a partial adjustment to the amount owed by the customer for goods that were not returned, but did not fully meet the customer expectations

account receivable

an informal credit arrangement with a customer for payment to be received after the sale is classified.

Receivables not expected to be collected should

not be counted in assets of the company

trade discount

percentage reduction from the list price

decreases assets decreases net income increases expenses

recording bad debt expense:

credit sales and sales on account

sales to customers in which the customers pay within 30 to 60 days.

GAAP

the allowance method is required by

account receivable

the amount of cash owed to a company by its customers from the sale of goods or services.

Net Revenue

total revenue less discounts, returns, and allowances

Credit Sales

when a business provides services to a customer, and the customer promises to pay later.

sales return

when a customer returns a product for a refund, in which account is the entry recorded?

sales return

when merchandise is returned for a refund or for credit to be applied to other purchases.