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Answer Key Chapter 7 Quiz.f11
Answer Key Chapter 7 Quiz.f11
ACG 301
Quiz Chapter 7
Fall 2011
A)
B)
C)
D)
1. Why is the allowance method preferred over the direct write-off method of accounting for bad debts?
Allowance method is used for tax purposes.
Estimates are used.
Determining worthless accounts under direct write-off method is difficult to do.
Improved matching of bad debt expense with revenue.
A)
B)
C)
D)
A)
B)
C)
D)
3. AG Inc. made a $15,000 sale on account with the following terms: 1/15, n/30. If the company uses the gross method
to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale?
Debit Accounts Receivable for $14,850.
Debit Accounts Receivable for $14,850 and Sales Discounts for $150.
Debit Accounts Receivable for $15,000.
Debit Accounts Receivable for $15,000 and Sales Discounts for $150.
A)
B)
C)
D)
$80,000
4,800
3,200
Credit
$850,000
$28,000
86,000
1,520
A)
B)
C)
D)
If the estimate of uncollectibles is made by taking 10% of gross account receivables, the amount of the adjustment is
$7,080.
$8,600.
$8,448.
$10,120.
A)
B)
C)
D)
6. Moon Inc. factors $2,000,000 of its accounts receivables with recourse for a finance charge of 4%. The finance
company retains an amount equal to 8% of the accounts receivable for possible adjustments. Moon estimates the fair
value of the recourse liability at $200,000. What would be the debit to Cash in the journal entry to record this
transaction?
$2,000,000.
$1,920,000.
$1,760,000.
$1,560,000.
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