chapter 8
contra, credit
Allowance for Doubtful Accounts is a(n) ______ - asset account and has a normal _____ balance
percentage of credit sales
Estimates bad debt expense based on the historical percentage of sales that lead to bad debt losses
extending payment periods, lending money, and selling large value items
Notes receivable are used for ______
allowance for doubtful accounts has an unadjusted credit balance
The Allowance for Doubtful Accounts had an unadjusted credit balance
debit bad debt expense, credit allowance for doubtful accounts
The adjusting entry to record the allowance for doubtful accounts includes a _____
decreases net accounts receivable
The allowance method is a method of accounting that ______ for estimated bad debts
365/receivables turnover ratio
The days to collect ratio is computed as ______
allowance for doubtful accounts
The direct write-off method does not require the ______ account
a write off
The entry that includes a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable is a(n)
debit notes receivable, credit cash
The entry to record the issuance of a note receivable is
debit notes receivable and credit cash
The entry to record the issuance of a note receivable is _____
selling expenses on the income statement
The fees charged by major credit card companies are included in ___
aging of accounts receivable
Which method of allowing for estimated uncollectible accounts is generally more accurate?
depreciation expense, bad debt expense and sales revenue
Which of the following accounts are temporary accounts closed (zeroed out) at the end of the accounting period into Retained Earnings?
avoid length cash collection periods, and the reduction of bad debts expense
Which of the following are advantages of using national credit cards?
channel stuffing
a company is selling to less financially secure customers or is allowing their customers to have more time to pay their accounts to entice them to buy more than they need
temporary account so its balance is closed (zeroed out) at the end of the accounting period
bad debt expense is...
debit bad debt expense, credit accounts receivable
the journal entry for the direct write-off method includes a _____
true
true or false: Allowance for Doubtful Accounts is a permanent account?
direct write-off
If a company writes off a specific customer's account with a debit to Bad Debt Expense and credit to Accounts Receivable, it must be using the ______ method.
assets, net income, and stockholders' equity are overstated by $1,000
If the adjusting entry to accrue interest of $1,000 on a note receivable is omitted, then ______
the number of times the average receivables balance is collected during the period (and a higher ratio is better)
What information is provided by the receivables turnover ratio?
no effect
What is the effect on the accounting equation if a company does not write off specific, non-paying customers' accounts receivable?
debit notes receivable and credit cash
What is the entry a company records at the time it issues a $1,000, 6% note to one of its employees that the employee needs to repay in 6 months?
allowance for doubtful accounts 2050 credit balance, and bad debt expense of 2000
Delectable, Inc.'s unadjusted trial balance includes Accounts Receivable of $10,000; Allowance for Doubtful Accounts of $50 credit balance; and Sales Revenue of $100,000 (all on credit). Management estimates that 2% of credit sales will be uncollectible. Delectable's financial statements will show ______.
bad debt expense 2000 and allowance for doubtful accounts 2050
Delectable, Inc.'s unadjusted trial balance includes Accounts Receivable of $10,000; Allowance for Doubtful Accounts of $50 credit balance; and Sales Revenue of $100,000 (all on credit). Management estimates that 2% of credit sales will be uncollectible. Delectable's financial statements will show ______.
greater, greater
Given the unadjusted Allowance for Doubtful Accounts has a $50 debit balance, the amount of receivables written off was ______ than the amount estimated in the prior period. Thus, bad debt expense will be ______ in the current period than had the unadjusted balance been a credit balance.
1000 debit
If the Allowance for Doubtful Accounts on January 1 equals $10,000 and during the year $11,000 of specific customers' accounts were written off, then its Allowance for Doubtful Accounts will have an unadjusted balance of _____
debit bad debt expense 1000 and credit allowance for doubtful accounts for 1000
Management estimates that 1% of the $100,000 of credit sales will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a ______
12 times
Net sales revenue is $720,000. Beginning and ending net accounts receivable are $62,000 and $58,000, respectively. Calculate the receivables turnover ratio.
increase one asset and decrease another
Sales made on account are recorded with a debit to Accounts Receivable and credit to Sales Revenue for the price times the quantity. Management knows that some of those accounts will not be collected but is unsure which specific customers it will be. Thus, management estimates the amount and records an adjusting entry. Later, when the specific non-paying customer is identified, it writes off the account. The effect of the write off on the accounting equation is to _____
reduce assets and stockholders equity when the adjusting entry is recorded
Sales made on account are recorded with a debit to Accounts Receivable and credit to Sales Revenue for the price times the quantity. Management knows that some of those accounts will not be collected but is unsure which specific customers it will be. Thus, management estimates the amount and records an adjusting entry. Later, when the specific non-paying customer is identified, it writes off the account. The effect of this process on the accounting equation is to _____
susceptible to management manipulation
Since accounting numbers, such as the allowance for doubtful accounts balance, are based on estimates, financial statements are _____
assets and stockholder's equity increase
The revenue recognition principle requires an adjusting entry to accrue interest earned and includes a debit to Interest Receivable and a credit to Interest Revenue. What effect does this adjusting entry have on the accounting equation?
true
True or false: GAAP require end-of-period adjustments for the estimated bad debts in the period of the credit sale even though the specific, non-paying customers have not yet been identified.
false
True or false: The adjusting entry to record Bad Debt Expense includes a credit to Accounts Receivable.
true
True or false: To ensure bad debt expense and the allowance for doubtful accounts do not become materially misstated over time, management will revise overestimates of prior period by lowering estimates in the current period.
debit to bad expense of 900 and a credit to allowance for doubtful accounts of 900
Using the aging approach, management estimates that $1,000 of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a ______.
greater than
Using the aging of receivables method, an unadjusted Allowance for Doubtful Accounts will have a debit balance when the amount of write offs recorded during the period is ______ the amount estimated to uncollectible in the prior accounting period.
an increase in assets and stockholders equity
What effect does the adjusting entry for interest earned but not yet received have on the accounting equation?
total assets stay the same
What effect does the collection of a note receivable, excluding interest, have on the accounting equation?
has no effect on net income
When the allowance method is used, the entry to record the write-off of an uncollectible account
a write off
When will a bankrupt customer's accounts receivable be eliminated? When the company records