chapter 8

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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


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