Financial Accounting- Chapter 5

A formal, signed credit agreement between a lender and a borrower is called a(n) _____ by the lender.

note recievable

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?

$93,000

The journal entry to record bad debt expense includes:

-debit to bad debt expense -credit to allowance for uncollectible accounts

A trade discount is a reduction from the list price, which is used to: (Select all that apply.)

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

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

aging

The percentage-of-receivables approach to measuring bad debt expense is referred to as _____ method

balance sheet

Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to

be more accurate

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

allowance for uncollectible accounts.

Accounts receivable should be classified as a(n)

asset

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?

$18,000

On Sept 1, year 1, Parnell Inc. received a 6-month, 6%, $2,000 note receivable with interest and principal to be collected on March 1 of year 2. What is the amount of interest revenue that should be recorded for year 1?

$40

Adrian Corp. sells goods on account for $100,000 on May 1. The customer paid for the goods on May 10. On May 15, the customer returns $40,000 of the merchandise. The entry Adrian makes on May 15 will include the following: (Select all that apply.)

-credit to cash -debit to sales return

Bell provides $500 of services to customers on account with terms 3/10, n/30. The Service Revenue account is credited for $500. If the customer pays within 10 days, Bell will record which of the following?

Debit Sales Discount $15

Warner Corp. sells goods on account for $10,000 on April 2. On April 20, the customer returns $3,000 of the merchandise. The customer has not yet paid for any of the goods. What is the entry Warner will make on April 20 when the goods are returned?

Debit Sales Returns; credit Accounts Receivable.

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

bad debt

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

bad debt expense.

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 account "Allowance for Uncollectible Accounts" is classified as

a contra asset to accounts receivable.

A trade discount is

a percentage reduction from list price.

The percentage-of-receivables method of estimating bad debt applies ____ to _____.

a single percentage; accounts receivable

The amount of cash owed to a company by its customers from the sale of goods or services is referred to as

account receivable

An informal credit arrangement with a customer for payment to be received after the sale is classified as a(n)

account recievable

The allowance for uncollectible accounts is a contra account to

account recievable

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

decreases; retained

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

future; current

When a business provides services to a customer, and the customer promises to pay later, this is referred to as

credit sales

Sales to customers in which the customers pay within 30 to 60 days are referred to as (Select all that apply.)

credit sales, sales on account

The Accounts Receivable account is reduced when the seller:

determines that a specific customer account will not be collectible

A customer account that is not expected to be collected is referred to as a(n) _____ debt.

uncollectible

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

Net revenues is calculated as total revenues minus which of the following items?

-Sales discounts -Sales allowances -Sales returns

Claire provides $100 of services to customers on account with terms 2/10, n/30. The Service Revenue account is credited for $100. If the customer pays within 10 days, Claire will record which of the following?

-Debit Sales Discount $2 -Credit Accounts Receivable $100 -Debit Cash $98

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

Sales Returns and Sales Allowances are______ -_______ accounts and require a debit entry to increase the account.

contra revenue

The Sales Returns and Sales Allowances accounts are classified as

contra revenue accounts.

The account "Allowance for Uncollectible Accounts" normally has a _____ balance.

credit

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

The formula for calculating interest on a note is

face value x annual rate x fraction of the annual period.

Companies extend credit to customers and sell goods on account because

it increases sales

An aging schedule classifies accounts receivable based on

length of time outstanding

Total revenues less discounts, returns, and allowances are referred to as _____________ revenues. (Enter only one word.)

net

A cash discount representing a reduction in the amount to be paid by a credit customer if the customer pays within a specified period of time is also referred to as a(n) ________ discount.

sales discount

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

sales discount

When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a(n) . (Enter only one word per blank.)

sales return

Accounts receivable are typically classified as current assets because

they will be converted to cash within 1 year.

The allowance method estimates

uncollectible accounts

Adrian Corp. sells goods on account for $100,000 on May 1. On May 15, the customer returns $40,000 of the merchandise. The customer has not yet paid for any of the goods. What will Adrian record on May 15? (Select all that apply.)

-Credit to Accounts Receivable. -Debit to Sales Returns.

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