Professional Documents
Culture Documents
An informal credit arrangement with a customer for payment to be received after the sale is classified as
a(n)
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Account receivable
2. When a business provides services to a customer, and the customer promises to pay later, this is referred
to as
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Credit sales
3. A trade discount is
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A reduction from list price
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They will be converted to cash within 1 year
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GAAP
6. The amount of cash owned to a company by its customer from sale of goods or services is referred to as
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Accounts receivable
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Uncollectible accounts
8. Sakes to customers in which the customers pay within 30 to 60 days are referred to as
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- Credit sales
- Sales on account
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Not be counted in assets of the company
10. A trade discount is a reduction from the list price, which is used to
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- Change price without publishing a new catalog
- Give quantity discounts to customers
- Disguise real prices from competitors
11. Accounts receivable should be classified as a(n)
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Asset
12. To record an estimate for future bad debts at the end of the period, an adjustment would be made with a
credit to
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Allowance for uncollectible accounts
13. A company that expects that some of its customers will not pat the agreed upon sales price must untilise
the
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Allowance method
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Account receivable
15. Under the allowance method, companies estimate _____ uncollectible amounts and report those
estimates in the ___ year
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Future; current
16. Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad
debt expenses of $1,000. Tudor has an ending balance in the allowance for uncollectible accounts of
$2,000. What is the net accounts receivable balance
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$18,000
Explanation:
$20,000 - $2,000
17. True of false: Accounts receivable not expected to be collected should be counted in the assets of the
company until they are later written off
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False
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A reduction from list price
19. The cost of estimated accounts receivable that will not be collected is referred to as ___ ____ expense
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Bad debt
20. The journal entry to record bad debt expense includes
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- Debit to bad debt expense
- Credit to allowance for uncollectible accounts
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Determines that a specific customer account will not be collectible
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A contra asset to accounts receivable
23. (Face value x annual interest rate x fraction of the annual period) is the formula for
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Interest on a note
24. 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’s is the net accounts receivable balance?
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$93,000
Explanation:
$100,000- $7,000
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Not be counted in assets of the company
26. When an account previously written off is collected in full, which is required to ensure the accounting
for the complete payment history of the customer
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An entry to reinstate the account receivable and an entry to record payment
27. The estimated expense for accounts that may not be collected is referred to as
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Bad debt expense
28. Ophelia Inc. just learned that Patton Inc., one of its customers with an outstanding accounts receivable
balance, field for bankruptcy. Assuming that the company utilise the allowance method, Ophelia should
record a(n):
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Decrease in Accounts Receivable
29. Compared to other methods of estimating uncollectible accounts, the ageing of accounts receivables
method tends to
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Be more accurate
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Face value x annual rate x fraction of the annual period
31. When the direct write-off method is used, an entry for bad debt expense is required
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When the account receivable is determined to be uncollectible
32. Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad
debt expenses of $1,000. Tudor has an ending balance in the allowance for uncollectible accounts of
$2,000. What is the net accounts receivable balance
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$18,000
33. Amend Inc. debited Accounts Receivable and credit Allowance for Uncollectible Accounts to re
establish an account previously written off. Amend Inc. should also debit ___ and credit ____.
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Cash; Accounts Receivable
34. The cost of estimated accounts receivable that will not be collected is referred to as ___ _____ expense
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Bad debt
35. A formal, signed credit agreement between a lender and a borrower is called a(n) _____ by the lender
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Note receivable
36. The approach that considers the age of various accounts receivables to estimate uncollectible accounts is
referred to as the _____ method of accounts receivable
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Ageing
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Income tax purpose
38. 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’s is the net accounts receivable balance?
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$93,000
39. Raven receives a 3-year note receivable from a customer from a customer for goods sold. How should
Raven report this note receivable in its financial statements?
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As a non-current asset
40. Two entries are required when a previously written off account is collected. These two entries include:
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- Reinstate the account receivable
- Record the collection on the account receivable
41. The receivables turnover ration and the average collection period provide information about a
company’s
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Effectiveness in managing receivables
42. A formal credit arrangement between a creditor and debtor is called a(n)
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Note receivable
43. Using a percentage of each period's net credit sales to estimate bad debt expense is a(n) ___ ___
approach to measuring bad debts
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Income statement
44. Compared to other methods of estimating uncollectible accounts, the ageing of accounts receivables
method tends to
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Be more accurate
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Uncollectible accounts are not anticipated or are immaterial
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In either current or non-current assets, as appropriate
47. Two important ratios that help in understanding a company’s effectiveness in managing receivables are
the
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- Receivables turnover ratio
- Average collection period
48. The income statement approach for estimating bad debts focuses on
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Current yearly credit sales
49. When the direct write-off method is used, an entry for bad debt expense is required
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When the account receivable is determined to be uncollectible
50. The income statement approach for estimations bad debts uses a percentage of
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Credit sales
51. sing a percentage of each period's net credit sales to estimate bad debt expense is a(n) ____ _____
approach to measuring bad debts
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Income statement