Financial and Managerial Accounting 14th Edition Warren Test Bank

Financial and Managerial Accounting
14th Edition Warren Test Bank

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Chapter 8 - Receivables
1. Receivables not currently collectible are reported in the investments section of the balance sheet.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.17.08-01 - LO: 08-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.12 - Receivables Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
2. Trade receivables occur when two companies trade or exchange notes receivable.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
3. Other receivables include nontrade receivables such as loans to company officers.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
4. Both Accounts Receivable and Notes Receivable represent claims that are expected to be collected in cash.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
5. When companies sell their receivables to other companies, the transaction is called factoring.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
6. Of the two methods of accounting for uncollectible receivables, the allowance method provides in advance for
uncollectible receivables.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
7. A disadvantage of factoring is that the company selling its receivables immediately receives cash.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
8. Small companies can use either the direct write-off method or the allowance method.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
9. GAAP requires companies with a large amount of receivables to use the allowance method.
a. True
b. False
ANSWER: True
DIFFICULTY: Bloom's: Remembering
Easy
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 - GAAP
ACCT.ACBSP.APC.12 - Receivables Reporting
BUSPROG: Analytic
10. The direct write-off method records bad debt expense when an account is determined to be uncollectible.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
11. Generally accepted accounting principles do not normally allow the use of the direct write-off method of accounting
for uncollectible accounts.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
ACCREDITING STANDARDS: ACCT.ACBSP.APC.02 - GAAP
BUSPROG: Analytic
12. The direct write-off method records bad debt expense in the year the specific account receivable is determined to be
uncollectible.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
13. No allowance account is used with the direct write-off method.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
14. When using the direct write-off method of accounting for uncollectible receivables, the account Allowance for
Doubtful Accounts is debited when a specific account is determined to be uncollectible.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
15. When an account receivable that has been written off is subsequently collected, the account receivable must first be
reinstated before recording the receipt of payment.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
16. Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a credit
balance before adjusting entries are recorded at the end of the accounting period.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
17. Allowance for Doubtful Accounts is a liability account.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
18. When using the percent of sales method of estimating uncollectibles, the entry to record bad debt expense includes a
credit to Accounts Receivable.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
19. The difference between the balance in Accounts Receivable and the balance in the Allowance for Doubtful Accounts
is called the net realizable value of the receivables.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
20. When the allowance method for accounting for uncollectible receivables is used, net income is reduced when a
specific receivable is written off.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
21. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a credit balance of $250. The credit
sales for the period total $500,000. If the company estimates uncollectible accounts at 1% of credit sales, the amount of
bad debt expense to be recorded in an adjusting entry is $4,750.
a. True
b. False
ANSWER: False
RATIONALE: Bad Debt Expense = Credit Sales × Bad Debt as a Percent of Credit Sales = $500,000
× 0.01 = $5,000
DIFFICULTY: Bloom's: Applying
Moderate
BUSPROG: Analytic
22. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $500. Credit
sales for the period total $800,000. If bad debt expense is estimated at 1% of credit sales, the amount of bad debt expense
to be recorded in the adjusting entry is $8,500.
a. True
b. False
ANSWER: False
× 0.01 = $8,000
Moderate
BUSPROG: Analytic
23. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $2,000. The
Accounts Receivable balance is analyzed by aging the accounts and, the amount estimated to be uncollectible is
$15,000. The amount to be recorded in the adjusting entry for the bad debt expense is $15,000.
a. True
b. False
ANSWER: False
RATIONALE: Bad debt expense = Uncollectible accounts estimate − Unadjusted allowance for
doubtful debts = $15,000 − ($2,000) = $17,000
Moderate
BUSPROG: Analytic
24. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a credit balance of $5,000. The
Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be uncollectible is $50,000.
The amount to be recorded in the adjusting entry for the Bad Debt Expense is $45,000.
a. True
b. False
ANSWER: True
doubtful debts = $50,000 − $5,000 = $45,000
Moderate
BUSPROG: Analytic
25. When using the analysis of receivables method for estimating uncollectible receivables, the amount computed in the
analysis is usually the amount that would be recorded in the end-of-period adjusting entry.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
26. The balance in Allowance for Doubtful Accounts at the end of the year includes the total of all accounts written off
since the beginning of the year.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
27. When accounting for uncollectible receivables and using the percentage of sales method, the matching principle is
violated.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy

BUSPROG: Analytic
28. A primary difference between the direct write-off and allowance method is whether or not bad debts is based on a
percentage of sales.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
29. The due date of a 60-day note dated July 10 is September 10.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
30. The maturity value of a 12%, 60-day note for $5,000 is $5,600.
a. True
b. False
ANSWER: False
RATIONALE: Maturity value = Face value + Interest = $5,000 + [$5,000 × 0.12 × (60 / 360)] =
$5,100
Easy
BUSPROG: Analytic
31. The maturity value of a note receivable is always the same as its face value.
a. True
b. False
ANSWER: False
Easy

BUSPROG: Analytic
32. The interest on a 6%, 60-day note for $5,000 is $300.

a. True
b. False
ANSWER: False
RATIONALE: Interest on 60-day note = $5,000 × 0.06 × (60 / 360) = $50
Easy
BUSPROG: Analytic
33. The party promising to pay a note at maturity is the maker.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
34. In computing the maturity date of a note, the date the note is issued is included but the due date is omitted.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
35. If a promissory note is dishonored, the payee should still record interest revenue.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy

BUSPROG: Analytic
36. The equation for computing interest on an interest-bearing note is as follows: Interest = Maturity Value × Interest Rate
× Time.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
37. If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
38. When a note is received from a customer on account, it is recorded by debiting Notes Receivable and crediting
Accounts Receivable.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions
BUSPROG: Analytic
39. When a note is written to settle an open account, no entry is necessary.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy

BUSPROG: Analytic
40. The balance of Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 - Financial Statements
BUSPROG: Analytic
41. Receivables that are expected to be collected in cash in eighteen months or less are reported in the current asset
section of the balance sheet.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
BUSPROG: Analytic
42. The accounts receivable turnover ratio is computed by dividing total gross sales by the average net receivables during
the year.
a. True
b. False
ANSWER: False
Easy
LEARNING OBJECTIVES: FNMN.WARD.17.08-ADM - LO: 08-ADM
ACCREDITING STANDARDS: ACCT.ACBSP.APC.23 - Financial Statement Analysis
BUSPROG: Analytic
43. The accounts receivable turnover measures the length of time in days it takes to collect a receivable.
a. True
b. False
ANSWER: False
Easy
BUSPROG: Analytic
44. The number of days’ sales in receivables is an estimate of the length of time the accounts receivable have been
outstanding.
a. True
b. False
ANSWER: True
Easy
BUSPROG: Analytic
45. A note receivable due in 18 months is listed on the balance sheet under the caption
a. long-term liabilities
b. fixed assets
c. current assets
d. investments
ANSWER: d
DIFFICULTY: Easy
ACCT.ACBSP.APC.13 - Long-term Assets Reporting
BUSPROG: Analytic
46. The receivable that is usually evidenced by a formal, written instrument of credit is a(n)
a. trade receivable
b. note receivable
c. accounts receivable
d. income tax receivable
ANSWER: b
DIFFICULTY: Easy

BUSPROG: Analytic
47. Which of the following receivables would not be classified as an "other receivable”?
a. advance to an employee
b. interest receivable
c. refundable income tax
d. notes receivable
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
48. Notes or accounts receivable that result from sales transactions are often called
a. nontrade receivables
b. trade receivables
c. merchandise receivables
d. sales receivables
ANSWER: b
DIFFICULTY: Easy
BUSPROG: Analytic
49. Which statement is not true?

a. Current assets are normally reported in order of their liquidity.
b. Disclosures related to receivables are reported on the financial statement notes.
c. Cash and cash equivalents are the first items reported under current assets.
d. All receivables that are expected to be realized in cash beyond 265 days are reported in the non-current assets
section.
ANSWER: d
Moderate
BUSPROG: Analytic
50. The term "receivables" includes all
a. money claims against other entities
b. merchandise to be collected from individuals or companies
c. cash to be paid to creditors
d. cash to be paid to debtors
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
51. If collection of an other receivable is expected beyond one year, it is classified as a

a. noncurrent asset and reported under Other Receivables
b. current asset and reported under Other Receivables
c. current asset and reported under Investments
d. noncurrent asset and reported under Investments
ANSWER: d
BUSPROG: Analytic
52. When does an account become uncollectible?

a. when accounts receivable is converted into notes receivable
b. when a discount is available on notes receivable
c. there is no general rule for when an account becomes uncollectible
d. at the end of the fiscal year
ANSWER: c
DIFFICULTY: Easy
BUSPROG: Analytic
53. The direct write-off method of accounting for uncollectible accounts

a. emphasizes balance sheet relationships
b. is often used by small companies and companies with few receivables
c. emphasizes cash realizable value
d. emphasizes the matching of expenses with revenues
ANSWER: b
DIFFICULTY: Easy
BUSPROG: Analytic
54. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
a. at the end of each accounting period
b. when a credit sale is past due
c. whenever a predetermined amount of credit sales have been made
d. when an account is determined to be worthless
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
55. An alternative name for Bad Debt Expense is

a. collection expense
b. credit loss expense
c. uncollectible accounts expense
d. deadbeat expense
ANSWER: c
DIFFICULTY: Easy
BUSPROG: Analytic
56. Two methods of accounting for uncollectible accounts are the

a. direct write-off method and the allowance method
b. allowance method and the accrual method
c. allowance method and the net realizable method
d. direct write-off method and the accrual method
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
57. The operating expense recorded from uncollectible receivables can be called all of the following except
a. accounts receivable
b. bad debt expense
c. doubtful accounts expense
d. uncollectible accounts expense
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
58. Indications that an account may be uncollectible include all of the following except
a. the customer closes its business
b. the customer is making small but regular payments
c. the customer files for bankruptcy
d. the customer cannot be located
ANSWER: b
DIFFICULTY: Easy
BUSPROG: Analytic
59. Selling receivables is called

a. factoring
b. sales revenue
c. a factor
d. sold receivables
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
60. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is
credited to write off a customer's account as uncollectible?
a. Bad Debt Expense
b. Accounts Receivable
c. Allowance for Doubtful Accounts
d. Interest Expense
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: FNMN.WARD.17.08-03 - LO: 03
BUSPROG: Analytic
61. The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a
customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this
account would be which of the following?
a. debit Allowance for Doubtful Accounts; credit Accounts Receivable

b. debit Sales; credit Accounts Receivable
c. debit Bad Debt Expense; credit Allowance for Doubtful Accounts
d. debit Bad Debt Expense; credit Accounts Receivable
ANSWER: d
BUSPROG: Analytic
62. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is
debited to write off a customer's account as uncollectible?
a. Uncollectible Accounts Receivable

d. Bad Debt Expense
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
63. The direct write-off method:

a. may be used only by businesses with five or fewer accounts receivable.
b. is used by businesses whose receivables are a small part of their current assets.
c. may not be used by companies that accept MasterCard or VISA.
d. does not allow for reinstatement if the amount owed is received after being written off.
ANSWER: b

Easy
BUSPROG - Analytic
64. When an account receivable is written off under the direct write-off method, the accounting equation is kept in balance
because:
a. assets and equity both decrease by the same amount.
b. assets both increase and decrease by the same amount.
c. assets and equity both increase by the same amount.
d. equity both increases and decreases by the same amount.
ANSWER: a
DIFFICULTY: Bloom's: Understanding
Moderate
BUSPROG - Analytic
65. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is debited to
write off a customer's account as uncollectible?
a. Uncollectible Accounts Expense
b. Allowance for Doubtful Accounts
c. Accounts Receivable
d. Interest Expense
ANSWER: b
DIFFICULTY: Easy
BUSPROG: Analytic
66. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of
$340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of the
accounts receivable?
a. $51,000
b. $289,000
c. $340,000
d. $391,000
ANSWER: b
RATIONALE: Net realizable value of accounts receivable = Adjusted accounts receivable −
Allowance for doubtful accounts = $340,000 − $51,000 = $289,000

Easy
BUSPROG: Analytic
67. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is credited to
write off a customer's account as uncollectible?
a. Uncollectible Accounts Expense
d. Interest Expense
ANSWER: b
DIFFICULTY: Easy
BUSPROG: Analytic
68. On the balance sheet after adjusting entries are made, the amount shown for the Allowance for Doubtful Accounts is
equal to the
a. uncollectible accounts expense for the year
b. total of the accounts receivable written off during the year
c. total estimated uncollectible accounts as of the end of the year
d. sum of all accounts that are past due
ANSWER: c
DIFFICULTY: Easy
BUSPROG: Analytic
69. What is the type of account and normal balance of Allowance for Doubtful Accounts?
a. contra asset, credit
b. asset, debit
c. asset, credit
d. contra asset, debit
ANSWER: a
DIFFICULTY: Easy

BUSPROG: Analytic
70. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when
a. a customer's account becomes past due
b. an account becomes bad and is written off
c. a sale is made
d. management estimates the amount of uncollectibles
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
71. A debit balance in the Allowance for Doubtful Accounts

a. is the normal balance for that account
b. indicates that actual bad debt write-offs have been less than what was estimated
c. cannot occur if the percentage of receivables method of estimating bad debts is used
d. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts
ANSWER: d
BUSPROG: Analytic
72. To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a
a. debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts
b. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts
c. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable
d. debit to Loss on Credit Sales and a credit to Accounts Receivable
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
73. Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts
a. liabilities decrease
b. net income is unchanged
c. total assets are unchanged
d. total assets decrease
ANSWER: d
BUSPROG: Analytic
74. Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000
and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding
receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful
Accounts has a credit balance of $2,500 before adjustment?
a. Bad Debt Expense 17,000

Allowance for Doubtful Accounts 17,000
b. Bad Debt Expense 19,500
c. Bad Debt Expense 22,000
d. Bad Debt Expense 65,000
ANSWER: a
RATIONALE: Bad debt expense for the year = (Accounts receivable balance × Percentage of
estimated uncollectible receivables) − Unadjusted allowance for doubtful accounts =
($390,000 × 0.05) − $2,500 = $17,000
Bad Debt Expense 17,000

Moderate
BUSPROG: Analytic
75. You have just received notice that a customer of yours with an Account Receivable balance of $100 has gone bankrupt
and will not make any future payments. Assuming you use the allowance method, the entry you make is to
a. debit Bad Debt Expense and credit Allowance for Doubtful Accounts
b. debit Bad Debt Expense and credit Accounts Receivable
c. debit Allowance for Doubtful Accounts and credit Accounts Receivable
d. debit Allowance for Doubtful Accounts and credit Bad Debt Expense
ANSWER: c
DIFFICULTY: Easy
Bloom's: Applying
BUSPROG: Analytic
76. The balance in Allowance for Doubtful Accounts will directly impact the end-of-period adjustment for the bad debt
expense when using which of the following methods?
a. allowance method based on aging the receivables

b. direct write-off method
c. accrual method
d. declining value method
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
77. An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals $7,900. If
Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt expense for the period
will require a
a. debit to Bad Debt Expense for $8,600

b. debit to Bad Debt Expense for $7,900
c. debit to Bad Debt Expense for $7,200
d. credit to Allowance for Doubtful Accounts for $700
ANSWER: c
doubtful accounts = $7,900 − $700 = $7,200
The adjustment to record the bad debt expense for the period will require a debit to
Bad Debt Expense for $7,200.

Moderate
BUSPROG: Analytic
78. An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals $6,400. If
Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad debt expense for the period
will require a
a. debit to Bad Debt Expense for $7,700

c. debit to Bad Debt expense for $5,100
d. credit to Allowance for Doubtful Accounts for $1,300
ANSWER: a
doubtful accounts = $6,400 − ($1,300) = $7,700
Bad Debt Expense for $7,700.

Moderate
BUSPROG: Analytic
79. An aging of a company's accounts receivable indicates that the estimate of the uncollectible accounts totals $4,000. If
Allowance for Doubtful Accounts has a $800 credit balance, the adjustment to record the bad debt expense for the period
will require a
a. debit to Allowance for Doubtful Accounts for $3,200

c. debit to Allowance for Doubtful Accounts for $4,000
d. credit to Allowance for Doubtful Accounts for $4,000
ANSWER: b
RATIONALE: Bad debt expense = Uncollectible accounts estimate – Unadjusted allowance for
doubtful accounts = $4,000 – $800 = $3,200.
Bad Debt Expense for $3,200

Easy
BUSPROG: Analytic
80. The collection of an account that had been previously written off under the allowance method of accounting for
uncollectibles
a. will increase net income in the period it is collected

b. will decrease net income in the period it is collected
c. does not affect net income in the period it is collected
d. requires a correcting entry for the period in which the account was written off
ANSWER: c
DIFFICULTY: Easy
BUSPROG: Analytic
81. Allowance for Doubtful Accounts has a credit balance of $2,100 at the end of the year (before adjustment), and an
analysis of customers' accounts indicates uncollectible receivables of $19,700. Which of the following entries records the
proper adjustment for bad debt expense?
a. debit Allowance for Doubtful Accounts, $17,600; credit Bad Debt Expense, $17,600
b. debit Allowance for Doubtful Accounts, $21,800; credit Bad Debt Expense, $21,800
c. debit Bad Debt Expense, $21,800; credit Allowance for Doubtful Accounts, $21,800
d. debit Bad Debt Expense, $17,600; credit Allowance for Doubtful Accounts, $17,600
ANSWER: d
doubtful accounts = $19,700 − $2,100 = $17,600

Moderate
BUSPROG: Analytic
82. Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the year (before adjustment), and an
analysis of customers' accounts indicates uncollectible receivables of $12,900. Which of the following entries records the
proper adjustment for bad debt expense?
a. debit Bad Debt Expense, $14,000; credit Allowance for Doubtful Accounts, $14,000
c. debit Allowance for Doubtful Accounts, $11,800; credit Bad Debt Expense, $11,800
ANSWER: a

Moderate
BUSPROG: Analytic
83. Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year (before adjustment), and an
analysis of accounts in the customers ledger indicates uncollectible receivables of $13,000. Which of the following
entries records the proper adjusting entry for bad debt expense?
a. debit Bad Debt Expense, $600; credit Allowance for Doubtful Accounts, $600
b. debit Bad Debt Expense, $12,400; credit Allowance for Doubtful Accounts, $12,400
c. debit Allowance for Doubtful Accounts, $600; credit Bad Debt Expense, $600
ANSWER: d
RATIONALE: Bad debt expense = Uncollectible accounts estimate – Unadjusted allowance for
doubtful accounts = $13,000 – ($600) = $13,600

Moderate
BUSPROG: Analytic
84. At the beginning of the year, the balance in Allowance for Doubtful Accounts is a credit of $760. During the year,
$120 of previously written off accounts are reinstated and accounts totaling $740 are written off as uncollectible. The
end-of-year balance (before adjustment) in Allowance for Doubtful Accounts should be
a. $760
b. $120
c. $140
d. $740
ANSWER: c
RATIONALE: End-of-year balance of Allowance for Doubtful Accounts = Beginning Allowance for
Doubtful Accounts + Previously written off accounts reinstated − Accounts written off
as uncollectibles = $760 + $120 − $740 = $140
Moderate
BUSPROG: Analytic
85. Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit
sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct?
a. Uncollectible accounts are estimated to be $55,500.
b. Uncollectible accounts are estimated to be $111,000.
c. Bad debt expense is estimated to be $5,550.
d. Bad debt expense is estimated to be $11,100.
ANSWER: b
RATIONALE: Uncollectible accounts = $5,550,000 × 0.02 = $111,000
Easy
BUSPROG: Analytic
86. Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit
sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct
regarding the entry to record estimated uncollectible receivables?
a. Cash will be debited
b. Bad Debt Expense will be credited
c. Allowance for Doubtful Accounts will be credited
d. Accounts Receivable will be debited
ANSWER: c
DIFFICULTY: Easy
BUSPROG: Analytic
87. Miles uses the allowance method and wrote off the account of James. Miles then received $559 as partial payment on
the account of James. The journal entry to record the initial write-off includes a
a. debit to Allowance for Doubtful Accounts
b. credit to Cash
c. debit to Accounts Receivable, James
d. credit to Bad Debt Expense
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
88. Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific receivable
previously written off would include a
a. credit to Bad Debt Expense
b. credit to Accounts Receivable
c. debit to Allowance for Doubtful Accounts
d. debit to Accounts Receivable
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
89. Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has determined that the
Irish Company account is uncollectible. To write off this account, Dalton should debit
a. Bad Debt Expense and credit Accounts Receivable
b. Bad Debt Expense and credit Allowance for Doubtful Accounts
c. Allowance for Doubtful Accounts and credit Accounts Receivable
d. Accounts Receivable and credit Allowance for Doubtful Accounts
ANSWER: c
DIFFICULTY: Easy
BUSPROG: Analytic
90. In accounting for uncollectible receivables, the balance in Allowance for Doubtful Accounts will directly impact the
amount of the adjustment when applying which method?
a. direct write-off method
b. percentage of sales method
c. analysis of receivables method
d. both percentage of sales and analysis of receivables methods
ANSWER: c
DIFFICULTY: Easy
BUSPROG: Analytic
91. Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of
credit sales will be uncollectible. On January 1, the Allowance for Doubtful Accounts had a credit balance of
$2,400. During the year, Abbott wrote off accounts receivable totaling $1,800 and made credit sales of $100,000. After
the adjusting entry, the December 31 balance in Bad Debt Expense will be
a. $1,200
b. $3,000
c. $3,600
d. $7,200
ANSWER: b
× 0.03 = $3,000
Moderate
BUSPROG: Analytic
92. A company uses the allowance method to account for uncollectible accounts receivable. When the firm writes off a
specific customer's account receivable
a. total current assets are reduced
b. total expenses for the period are increased
c. net realizable value of accounts receivable increases
d. there is no effect on total current assets or total expenses
ANSWER: d
BUSPROG: Analytic
93. Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year (before adjustment). The
company prepares an analysis of customers' accounts to estimate the amount of uncollectible accounts of $41,900. Which
of the following adjusting entries would be made to record the Bad Debt Expense for the year?
a. debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600
c. debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200
ANSWER: d
doubtful debts = $41,900 − $1,300 = $40,600

Moderate
BUSPROG: Analytic
94. Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment). The
company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to be
$31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?
a. debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
c. debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
ANSWER: a

Moderate
BUSPROG: Analytic
95. Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year (before adjustment), and bad
debt expense is estimated at 4% of credit sales. If net credit sales are $800,000, the amount of the adjusting entry to
record the estimate of the uncollectible accounts is
a. $29,500
b. $34,500
c. $32,000
d. cannot be determined
ANSWER: c
RATIONALE: Uncollectible accounts estimate = Credit sales × Bad debts as a percent of credit sales
= $800,000 × 0.04 = $32,000
Moderate
BUSPROG: Analytic
96. Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment), and an
analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts should be
$16,000. Based on this estimate, which of the following adjusting entries should be made?
a. debit Bad Debt Expense, $800; credit Allowance for Doubtful Accounts, $800
b. debit Bad Debt Expense, $15,200; credit Allowance for Doubtful Accounts, $15,200
c. debit Allowance for Doubtful Accounts, $800; credit Bad Debt Expense, $800
ANSWER: b
doubtful accounts = $16,000 − $800 = $15,200

Moderate
BUSPROG: Analytic
97. The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that
$640 of accounts receivable are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. The
adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:
a. $110
b. $640
c. $530
d. $750
ANSWER: d
RATIONALE: Credit to Allowance for Doubtful Accounts = Uncollectible accounts estimate −
Unadjusted allowance for doubtful accounts = $640 − ($110) = $750
Moderate
BUSPROG: Analytic
98. Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and bad debt
expense is estimated at 3% of credit sales. If credit sales are $300,000, the amount of the adjusting entry to record the
estimated uncollectible accounts receivable is
a. $8,500
b. $9,500
c. $9,000
d. Cannot be determined
ANSWER: c
RATIONALE: Uncollectible accounts estimate = Credit sales × Bad debt as a percent of credit sales =
$300,000 × 0.03 = $9,000

Moderate
BUSPROG: Analytic
99. Allowance for Doubtful Accounts is classified as a(n) ______ account and has a normal ______ balance.
a. owners’ equity, credit

b. contra asset, debit
c. owners’ equity, debit
d. contra asset, credit
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
100. Under the allowance method of accounting for uncollectible receivables, writing off an uncollectible account
a. affects only income statement accounts
b. is not an acceptable practice
c. affects only balance sheet accounts
d. affects both balance sheet and income statement accounts
ANSWER: c
DIFFICULTY: Easy
BUSPROG: Analytic
101. When comparing the direct write-off method and the allowance method of accounting for uncollectible receivables, a
major difference is that the direct write-off method
a. uses a percentage of sales method to estimate uncollectible accounts
b. is used primarily by large companies with many receivables
c. is used primarily by small companies with few receivables
d. uses an allowance account
ANSWER: c
DIFFICULTY: Easy
BUSPROG: Analytic
102. When a company uses the allowance method of accounting for uncollectible receivables, which entry would not be
found in the general journal?
a. Bad Debt Expense 500
Allowance for Doubtful Accounts 500
b. Bad Debt Expense 500
Accounts Receivable, Bob Smith 500
c. Cash 300
d. Cash 500
ANSWER: b
DIFFICULTY: Easy
Bloom's: Applying
BUSPROG: Analytic
103. When a company uses the allowance method of accounting for uncollectible receivables, the entry to reinstate a
previously written off account would include a
a. credit to Bad Debt Expense
b. debit to Bad Debt Expense
c. debit to Allowance for Doubtful Accounts
d. credit to Allowance for Doubtful Accounts
ANSWER: d
BUSPROG: Analytic
104. The amount for which a promissory note is written is called the
a. realizable value
b. maturity value
c. face value
d. proceeds
ANSWER: c
DIFFICULTY: Easy
BUSPROG: Analytic
105. The amount of the promissory note plus the interest earned on the due date is called the
a. interest value
b. maturity value
c. face value
d. issuance value
ANSWER: b
DIFFICULTY: Easy
BUSPROG: Analytic
106. A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of the note is
a. $6,860
b. $7,140
c. $7,840
d. $7,000
ANSWER: d
DIFFICULTY: Easy
Bloom's: Applying
BUSPROG: Analytic
107. A 60-day, 9% note for $10,000, dated May 1, is received from a customer on account. The maturity value of the note
is
a. $10,000
b. $10,150
c. $10,900
d. $9,100
ANSWER: b
$10,150
Moderate
BUSPROG: Analytic
108. Interest on a note can be calculated without knowledge of the
a. fair value of the note
b. rate of interest
c. note duration
d. principal amount
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
109. On October 1, Black Company receives a 9% interest-bearing note from Reese Company to settle a $20,000 account
receivable. The note is due in six months. At December 31, Black should record interest revenue of
a. $0
b. $450
c. $900
d. $1,800
ANSWER: b
RATIONALE: Interest revenue = $20,000 × 0.09 × (3 / 12) = $450
Moderate
BUSPROG: Analytic
110. If the maker of a promissory note fails to pay the note on the due date, the note is said to be
a. displaced
b. disallowed
c. dishonored
d. discounted
ANSWER: c
DIFFICULTY: Easy
BUSPROG: Analytic
111. The journal entry to record a note received from a customer to replace an account is
a. debit Notes Receivable; credit Accounts Receivable
b. debit Accounts Receivable; credit Notes Receivable
c. debit Cash; credit Notes Receivable
d. debit Notes Receivable; credit Notes Payable
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
112. A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to
recognize this event is
a. debit Cash, $6,120; credit Notes Receivable, $6,120
b. debit Notes Receivable, $6,120; credit Accounts Receivable, $6,000; credit Interest Receivable, $120
c. debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
d. debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Revenue, $120
ANSWER: d
RATIONALE: Interest = $6,000 × 0.12 × (60 / 360) = $120
Accounts Receivable 6,120
Notes Receivable 6,000
Interest Revenue 120

Moderate
BUSPROG: Analytic
113. When referring to a note receivable or promissory note

a. the maker is the party to whom the money is due
b. the note is not considered a formal credit instrument
c. the note cannot be factored to another party
d. the note may be used to settle an accounts receivable
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
114. When a company receives an interest-bearing note receivable, it will
a. debit Notes Receivable for the maturity value of the note
b. debit Notes Receivable for the face value of the note
c. credit Notes Receivable for the maturity value of the note
d. credit Notes Receivable for the face value of the note
ANSWER: b
DIFFICULTY: Easy
BUSPROG: Analytic
115. Paper Company receives a $6,000, 3-month, 6% promissory note from Dame Company in settlement of an open
accounts receivable. What entry will Paper Company make upon receiving the note?
a. Notes Receivable—Dame Company 6,000
Accounts Receivable—Dame Company 6,000
b. Notes Receivable—Dame Company 6,090
c. Notes Receivable—Dame Company 6,090
Interest Revenue 90
d. Notes Receivable—Dame Company 6,000
Interest Revenue 90
Interest Receivable 90
ANSWER: a
DIFFICULTY: Easy
Bloom's: Applying
BUSPROG: Analytic
116. The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is
a. $40,000
b. $40,400
c. $43,600
d. $44,000
ANSWER: b
$40,400

Easy
BUSPROG: Analytic
117. Harper Company lends Hewell Company $40,000 on March 1, accepting a four-month, 6% interest note. Harper
Company prepares financial statements on March 31. What adjusting entry should be made before the financial
statements can be prepared?
a. Cash 200
b. Interest Receivable 800
c. Interest Receivable 200
d. Note Receivable 40,000
Cash 40,000
ANSWER: c
RATIONALE: Interest = $40,000 × 0.06 × (1 / 12) = $200
Interest Receivable 200

Easy
BUSPROG: Analytic
118. On August 1, Kim Company accepted a 90-day note receivable as payment for services provided to Hsu
Company. The terms of the note were $20,000 face value and 6% interest. On October 30, the journal entry to record the
collection of the note should include a
a. credit to Notes Receivable for $20,300
b. debit to Interest Receivable for $300
c. credit to Interest Revenue for $300
d. debit to Notes Receivable for $20,000
ANSWER: c
RATIONALE: Interest Revenue to be credited = $20,000 × 0.06 × (90 / 360) = $300
Moderate
BUSPROG: Analytic
119. Current assets are usually listed in order
a. of the due date
b. of the size
c. alphabetically
d. of liquidity
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
120. The accounts receivable turnover measures

a. how frequently during the year the accounts receivable are converted to cash
b. the number of days of accounts receivable outstanding
c. the fair market value of accounts receivable
d. the efficiency of the accounts payable function
ANSWER: a
Easy
BUSPROG: Analytic
121. The number of days' sales in receivables

a. is an estimate of the length of time the receivables have been outstanding
b. measures the number of times the receivables turn over each year
c. is credit sales divided by average receivables
d. is not meaningful and therefore is not used
ANSWER: a
Easy
BUSPROG: Analytic
122. Given the following information, compute accounts receivable turnover:
Gross sales $150,000 Accounts receivable, beginning of year $18,000
Sales 135,000 Accounts receivable, end of year 22,000

a. 6.75
b. 7.50
c. 6.13
d. 6.82
ANSWER: a
RATIONALE: Accounts Receivable Turnover = Sales / Average Accounts Receivable = $135,000 /
($18,000 + $22,000) = 6.75
Moderate
BUSPROG: Analytic
123. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts
has a credit balance of $5,500; and sales for the year total $2,500,000. An analysis of receivables estimates uncollectible
receivables as $25,000.
Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance for Doubtful
Accounts, respectively.
a. $19,500 and $25,000

b. $30,500 and $525,000
c. $19,500 and $525,000
d. $30,500 and $25,000
ANSWER: a
Allowance for doubtful accounts = Unadjusted allowance for doubtful accounts + Bad
debt expense = $5,500 + $19,500 = $25,000

Moderate
BUSPROG: Analytic
Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting
entry for bad debt expense and the adjusted balance of Allowance for Doubtful Accounts.)
a. $550,000
b. $544,500
c. $525,000
d. $575,000
ANSWER: c
Adjusted allowance for doubtful accounts = Unadjusted allowance for doubtful
accounts + Bad debt expense = $5,500 + $19,500 = $25,000
Net realizable value of accounts receivable = Accounts receivables − Allowance for

Moderate
BUSPROG: Analytic
125. Other than Accounts Receivable and Notes Receivable, name other receivables that might be included in the general
ledger.
ANSWER: Interest Receivable, Receivables from Officers or Employees, Taxes Receivable
DIFFICULTY: Easy
Bloom's: Understanding
BUSPROG: Analytic
126. Discuss the similarities and differences between accounts receivable, notes receivable, and other receivables.
ANSWER: Accounts receivable result from the sale of goods and services on credit. They are
normally collected within a short period of time (30–60 days) and are classified as
current assets on the balance sheet.
Notes receivable can also result from the sale of goods, generally when the amount
owed is due in more than 60 days. Notes can also be used to settle accounts
receivable. Notes are formal written instruments of credit. When collection is
expected to be in less than one year, they are classified as current assets on the balance
sheet.
Other receivables result from non-trade transactions (interest, taxes, amounts due from
employees). They are generally reported separately on the balance sheet. If collection
is expected in less than one year, they are classified as current assets. If not, they are
classified as investments.
BUSPROG: Analytic
127. List at least three indicators that a receivable may be uncollectible.

ANSWER: Answers may vary and should include three of the following:
1. The receivable is past due.
2. The customer does not respond to the company’s attempts to collect.
3. The customer files for bankruptcy.
4. The customer closes its business.
5. The company cannot locate the customer.
BUSPROG: Analytic
128. Discuss the two methods for recording bad debt expense. What type of company uses each method?
ANSWER: The first method is the direct write-off method. Under this method, bad debt expense
is recorded only when an account is deemed uncollectible. This method is most often
used by small companies and those with few receivables.
The second method is the allowance method. Under this method, bad debt expense is
recorded by estimating bad debts at the end of the accounting period. Companies that
have a large amount of receivables are required to use this method under generally
accepted accounting principles (GAAP).
DIFFICULTY: Easy
FNMN.WARD.17.08-05 - LO: 08-05
BUSPROG: Analytic
129. Journalize the following transactions using the direct write-off method of accounting for uncollectible receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.
ANSWER:
April 1 Accounts Receivable 7,200
Sales 7,200
1 Cost of Merchandise Sold 5,400

Inventory 5,400
June 10 Cash 2,400

Accounts Receivable—Jim Dobbs 7,200
Oct. 11 Accounts Receivable—Jim Dobbs 4,800

11 Cash 4,800
DIFFICULTY: Challenging
Bloom's: Applying
BUSPROG: Analytic
130. Roe's Renovations utilizes the direct write-off method of accounting for uncollectible receivables. On September 15
the company is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is expected in the
liquidation. Write off the $675 of accounts receivable due from Jacob Marley.
ANSWER: Sept. 15 Bad Debt Expense 675
Accounts Receivable—Jacob Marley 675
DIFFICULTY: Easy
Bloom's: Applying
BUSPROG: Analytic
131. Journalize the following transactions using the direct write-off method of accounting for uncollectible receivables:
Feb. 20 Received $1,000 from Andrew Warren and wrote off the remainder owed of $4,000 as uncollectible.
May 10 Reinstated the account of Andrew Warren and received $4,000 cash in full payment.
ANSWER: Feb. 20 Cash 1,000
Accounts Receivable—Andrew Warren 5,000
May 10 Accounts Receivable—Andrew Warren 4,000

10 Cash 4,000
Accounts Receivable—Andrew Warren 4,000
DIFFICULTY: Easy
Bloom's: Applying
BUSPROG: Analytic
132. The following journal entries would be used in one of the two methods of accounting for uncollectible
receivables. Identify each.
(a)
Bad Debt Expense 900
Accounts Receivable—Billings 900
(b)
Accounts Receivable—Grover 900
ANSWER: (a) Direct Write-Off Method
(b) Allowance Method
DIFFICULTY: Easy
BUSPROG: Analytic
133. Theta Company determines that a $6,300 account receivable from CorpCo is uncollectible and writes off the account
using the direct write-off method on June 16. Journalize the entry to write off the account. You may omit posting
references.
Journal
Date Description Post Ref. Debit Credit
ANSWER: Journal
Jun. 16 Bad Debt Expense 6,300
Accounts Receivable—CorpCo 6,300

Easy
LEARNING OBJECTIVES: FNMN.WARR.17.08-03 - LO: 03
BUSPROG - Analytic
134. Theta Company determines that a $6,300 account receivable from CorpCo is uncollectible and writes off the account
using the direct write-off method on June 16. On August 21, CorpCo pays the $6,300 to Theta Company.
Journalize the entry for the reinstatement of the account receivable and receipt of cash on August 21. You may omit
posting references.
Journal
ANSWER: Journal
Aug. 21 Accounts Receivable—CorpCo 6,300
21 Cash 6,300
Accounts Receivable—CorpCo 6,300

Easy
LEARNING OBJECTIVES: FNMN.WARR.17.08-03 - LO: 03
BUSPROG - Analytic
135. Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases and indicate
the ending balance in each case.
(a) Credit balance of $300 in Allowance for Doubtful Accounts just prior to
adjustment. Analysis of Accounts Receivable indicates uncollectible receivables of $8,500.
(b) Credit balance of $500 in Allowance for Doubtful Accounts just prior to
adjustment. Uncollectible receivables are estimated at 2% of credit sales, which totaled
$1,000,000 for the year.
ANSWER: (a) Amount added: $8,200 Ending balance: $8,500
(b) Amount added: $20,000 Ending balance: $20,500
BUSPROG: Analytic
136. Journalize the following transactions using the allowance method of accounting for uncollectible receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.
ANSWER:
April 1 Accounts Receivable 7,200
Sales 7,200
1 Cost of Merchandise Sold 5,400

Inventory 5,400
June 10 Cash 2,400

Oct. 11 Accounts Receivable—Jim Dobbs 4,800

11 Cash 4,800
DIFFICULTY: Easy
Bloom's: Applying
BUSPROG: Analytic
has a credit balance of $5,500; and sales for the year total $3,500,000. Bad debt expense is estimated at 1/2 of 1% of net
sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts Receivable,
Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of accounts receivable.
ANSWER: (a) $17,500 ($3,500,000 × 0.005)
Adjusted Balance
(b) Accounts Receivable $700,000
Allowance for Doubtful Accounts ($5,500 + $17,500) 23,000
(c) Net realizable value ($700,000 – $23,000) $677,000
Bloom's: Applying
BUSPROG: Analytic
has a debit balance of $6,200; and sales for the year total $3,500,000. Bad debt expense is estimated at 1/2 of 1% of sales.
ANSWER: (a) $17,500 ($3,500,000 × 0.005)
Adjusted Balances
Allowance for Doubtful Accounts ($17,500 – $6,200) 11,300

Bloom's: Applying
BUSPROG: Analytic
139. At the end of the current year, Accounts Receivable has a balance of $90,000; Allowance for Doubtful Accounts has
a credit balance of $850; and sales for the year total $300,000. Bad debt expense is estimated at 2.5% of sales.
Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of Accounts
Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of accounts
receivable.
ANSWER: (a) $7,500 ($300,000 × 0.025)
Adjusted Balance
Allowance for Doubtful Accounts ($850 + $7,500) 8,350

Bloom's: Applying
BUSPROG: Analytic
ANSWER: (a) $19,500 ($25,000 – $5,500)
Adjusted Balance
Allowance for Doubtful Accounts ($5,500 + $19,500) 25,000

Bloom's: Applying
BUSPROG: Analytic
has a debit balance of $5,400; and sales for the year total $3,000,000. An analysis of receivables indicates the
uncollectible receivables are estimated to be $45,000.
ANSWER: (a) $50,400 ($45,000 + $5,400)
Adjusted Balance
Allowance for Doubtful Accounts ($50,400 – $5,400) 45,000

Bloom's: Applying
BUSPROG: Analytic
142. Discount Mart utilizes the allowance method of accounting for uncollectible receivables. On December 12 the
company receives a $550 check from Chad Thomas in settlement of Thomas’s $1,100 outstanding accounts receivable.
Due to Thomas’s failing health he is closing his company and is expecting to make no further payments to Discount Mart.
Journalize this declaration.
ANSWER: Dec. 12 Cash 550
Accounts Receivable, Chad Thomas 1,100
Bloom's: Applying
BUSPROG: Analytic
143. On June 30 (the end of the period), Brown Company has a credit balance of $2,275 in Allowance for Doubtful
Accounts. An evaluation of accounts receivable indicates that the proper balance should be $30,025. Journalize the
appropriate adjusting entry.
ANSWER: June 30 Bad Debt Expense 27,750*
*$30,025 – $2,275 = $27,750
DIFFICULTY: Easy
Bloom's: Applying
BUSPROG: Analytic
144. (a) The aging of Torme Designs' accounts receivable is shown below. Calculate the amount of each periodicity range
that is deemed to be uncollectible.
Est. Uncollectible Accts.

Age Interval Balance Percentage Amount
Not past due 850,000 3.50%
1-30 days past due 47,500 5.00%
31-60 days past due 21,750 10.00%
61-90 days past due 11,250 20.00%
91-180 days past due 5,060 30.00%
181-365 days past due 2,500 50.00%
Over 365 days past due 1,140 95.00%
Total 939,200
(b) If the Allowance for Doubtful Accounts has a credit balance of $1,135, record the adjusting entry for
the bad debt expense for the year.
ANSWER: (a) Est. Uncollectible Accts.
Age Interval Balance: Percentage: Amount:
Not past due $850,000 3.50% $29,750
1-30 days past due 47,500 5.00% 2,375
31-60 days past due 21,750 10.00% 2,175
61-90 days past due 11,250 20.00% 2,250
91-180 days past due 5,060 30.00% 1,518
181-365 days past due 2,500 50.00% 1,250
Over 365 days past due 1,140 95.00% 1,083
Total: $939,200 $40,401
(b)
Dec. 31 Bad Debt Expense 39,266
Calculation of expense:
Amount of calculated uncollectible accounts $40,401
Less credit balance of account 1,135
Bad debt expense $39,266
Bloom's: Applying
BUSPROG: Analytic
145. For each of the following scenarios, indicate the amount of the adjusting journal entry for bad debt expense to be
recorded, the balance in Allowance for Doubtful Accounts after adjustment at December 31, and the net realizable value
of accounts receivable at December 31.
(a) Based on an analysis of Simmon’s Company’s $380,000 balance in Accounts Receivable at December 31, it was
estimated that $15,500 will be uncollectible. There is a credit balance of $1,200 in Allowance for Doubtful Accounts
before adjustment.
(b) Blake Company had credit sales of $900,000 at year-end, and has an Accounts Receivable balance of $425,000 at
December 31, and an Allowance for Doubtful Accounts credit balance of $11,000 before adjustment. Blake estimates bad
debt expense as 3/4 of 1% of credit sales.
(c) Hidgon Inc. has a balance of $812,000 in Accounts Receivable at December 31. An analysis of those receivables
shows $24,000 will probably not be collected. Before adjusting entries are prepared, the Allowance for Doubtful
Accounts has a debit balance of $750.
ANSWER: (a) Bad Debt Expense $ 14,300
Allowance for Doubtful Accounts at Dec. 31 15,500
Net Realizable Value of A/R at Dec. 31 364,500
(b) Bad Debt Expense $ 6,750

(c) Bad Debt Expense $ 24,750

Bloom's: Applying
BUSPROG: Analytic
146. A partially completed aging of receivables schedule for Lindy Designs is shown below. Calculate the amount that is
estimated to be uncollectible.
(a) Determine the amount estimated to be uncollectible by completing the aging of receivables schedule. Round
calculations to the nearest dollar.
Est. Uncollectible Accounts
Not past due $550,000 2.50%
1—30 days past due 96,500 4.00%
31—60 days past due 43,750 9.50%
61—90 days past due 22,250 16.00%
91—180 days past due 5,600 31.00%
181—365 days past due 3,100 60.00%
Over 365 days past due 1,250 95.00%
Total $722,450
(b) If the Allowance for Doubtful Accounts has a credit balance of $9,700, record the adjusting entry for the bad debt
expense for the year.
(c) If the Allowance for Doubtful Accounts has a debit balance of $9,700, record the adjusting entry for the bad debt
expense for the year.
ANSWER: (a)
Est. Uncollectible Accounts
Not past due $550,000 2.50% $13,750
1—30 days past due 96,500 4.00% 3,860
31—60 days past due 43,750 9.50% 4,156
61—90 days past due 22,250 16.00% 3,560
91—180 days past due 5,600 31.00% 1,736
181—365 days past due 3,100 60.00% 1,860
Over 365 days past due 1,250 95.00% 1,188
Total $722,450 $30,110
(b) Dec. 31 Bad Debt Expense 20,410

Less credit balance of account 9,700
(c) Dec. 31 Bad Debt Expense 39,810

Plus debit balance of account 9,700
Bloom's: Applying
BUSPROG: Analytic
147. Discuss the (a) focus and (b) financial statement emphasis of the percent of sales and the analysis of receivables
methods of estimating bad debts.
ANSWER: (a) Bad debt expense is the focus of the percent of sales method. It places more
emphasis on matching revenues and expenses and thus emphasizes the income
statement.
(b) The allowance for doubtful accounts is the focus of the analysis of receivables
method. It places more emphasis on the net realizable value of receivables and thus
emphasizes the balance sheet.

BUSPROG: Analytic
148. Morry Company wrote off the following accounts receivable as uncollectible for the first year of its operations
ending December 31:
Customer Amount
J. Jackson $10,000
L. Stanton 9,500
C. Barton 13,100
S. Fenton 7,400
Total $40,000
Required:
(a) Journalize the write-offs for the current year under the direct write-off method.
(b) Journalize the write-offs for the current year under the allowance method. Also,
journalize the adjusting entry for uncollectible receivables assuming the company made
$2,400,000 of credit sales during the year and the industry average for uncollectible
receivables is 1.50% of credit sales.
(c) How much higher or lower would Morry Company’s net income have been under the
direct write-off method than under the allowance method?
ANSWER: (a) Bad Debt Expense 40,000

Accounts Receivable—J. 10,000
Jackson
Accounts Receivable—L. 9,500
Stanton
Accounts Receivable—C. 13,100
Barton
Accounts Receivable—S. 7,400
Fenton
(b) Allowance for Doubtful Accounts 40,000

Accounts Receivable—J. 10,000
Jackson
Accounts Receivable—L. 9,500
Stanton
Accounts Receivable—C. 13,100
Barton
Accounts Receivable—S. 7,400
Fenton

Allowance for Doubtful 36,000
Accounts
Uncollectible accounts estimate.
($2,400,000 × 1 1/2% = $36,000)
(c) Net income would have been $4,000 lower under the direct
write-off method, because bad debt expense is $4,000 higher
under the direct write-off method ($36,000 expense under the
allowance method vs. $40,000 expense under the direct write-
off method).
Bloom's: Applying
BUSPROG: Analytic
149. Fellows Corporation has determined that the $2,700 accounts receivable due from Andrew Stevens is
uncollectible. Compare the journal entry that is required under the direct write-off method to the journal entry that is
required using the allowance method.
ANSWER: Under the direct write-off method, Bad Debt Expense will be debited for
$2,700. Under the allowance method, the debit will be made to Allowance for
Doubtful Accounts. Under both methods, Accounts Receivable—Andrew Stephens
will be credited for $2,700.
BUSPROG: Analytic
150. For a business that uses the allowance method of accounting for uncollectible receivables:
(a) Journalize the entries to record the following:
(1) Record the adjusting entry at December 31, the end of the first fiscal year, to record
the bad debt expense. The accounts receivable account has a balance of $800,000,
and the contra asset account before adjustment has a debit balance of $600. Analysis
of the receivables indicates uncollectible receivables of $18,000.
(2) In March of the next year, the $350 owed by Fronk Co. on account is written off as
uncollectible.
(3) In November of the next year, $200 of the Fronk Co. account is reinstated and
payment of that amount is received.
(4) In December of the next year, $400 is received on the $600 owed by Dodger Co. and
the remainder is written off as uncollectible.
(b) Redo the entries in steps (2), (3), and (4) assuming the company uses the direct write-off
method.
ANSWER: (a)
(1) Bad Debt Expense 18,600
(2) Allowance for Doubtful Accounts 350

Accounts Receivable—Fronk Co. 350
(3) Accounts Receivable—Fronk Co. 200

Cash 200
(4) Cash 400

Accounts Receivable—Dodger Co. 600
(b)
(2) Bad Debt Expense 350
(3) Accounts Receivable—Fronk Co. 200

Cash 200
(4) Cash 400

Accounts Receivable—Dodger Co. 600
Bloom's: Applying
FNMN.WARD.17.08-05 - LO: 08-05
BUSPROG: Analytic
151. Sunshine Service Center received a 120-day, 6% note for $40,000, dated April 12 from a customer on account.
(a) Determine the due date of the note.
(b) Determine the maturity value of the note.
(c) Journalize the entry to record the receipt of the payment of the note at maturity.
ANSWER: (a) August 10 determined as follows:
April 18 days (30-12) days
May 31 days
June 30 days
July 31 days
August 10 days
Total 120 days
(b) $40,800 [$40,000 + ($40,000 × 6% × (120/360)]
(c)
Aug. 10 Cash 40,800
Note Receivable 40,000
Bloom's: Applying
BUSPROG: Analytic
152. Fill in the blanks related to the characteristics of a promissory note.

1. The party promising to pay the note is called the ________.
2. The amount for which the note is written is called the _______ amount.
3. The date the note is to be paid is the _______ date.
4. The time between the date when a note is written and the time it must be paid is called the _____ of the note.
ANSWER: 1. maker
2. face
3. maturity or due
4. term
DIFFICULTY: Easy
BUSPROG: Analytic
153. Determine the due date and amount of interest due at maturity on the following notes:
Origination TermFace Interest Maturity Interest
Date Amount
of Note Rate Date Amount
(a) Mar. 15 $8,000
60 days 9% _______ _______
(b) May 1 $12,000
90 days 8% _______ _______
ANSWER: (a) May 14; $120 ($8,000 × 0.09 × 60/360)
(b) July 30; $240 ($12,000 × 0.08 × 90/360)
DIFFICULTY: Easy
Bloom's: Applying
BUSPROG: Analytic
154. Blackwell Industries received a 120-day, 9% note for $180,000, dated August 10 from a customer on account.
Required:
ANSWER: (a) The due date for the note is December 8, determined as follows:
August (31 – 10) 21 days
September 30 days
October 31 days
November 30 days
December 8 days
Total 120 days
(b) $185,400 [$180,000 + ($180,000 × 9% × 120/360)]

(c) Dec. 8 Cash 185,400
Interest Revenue 5,400
Bloom's: Applying
BUSPROG: Analytic
155. Determine the due date and the amount of interest due at maturity on the following notes:
Date of Note Face Amount Interest Rate Term of Note

(a) October 1 $21,000 8% 60 days
(b) August 30 9,000 10% 120 days
(c) May 30 12,000 12% 90 days
(d) March 6 15,000 9% 60 days
(e) May 23 9,000 10% 60 days
ANSWER: Due Date Interest

(a) Nov. 30 $280 [$21,000 × 0.08 × (60/360)]
(b) Dec. 28 300 [$9,000 × 0.10 × (120/360)]
(c) Aug. 28 360 [$12,000 × 0.12 × (90/360)]
(d) May 5 225 [$15,000 × 0.09 × (60/360)]
(e) July 22 150 [$9,000 × 0.10 × (60/360)]
Bloom's: Applying
BUSPROG: Analytic
156. Journalize the following transactions for Lucite Company.
November 14 Received a $4,800.00, 90-day, 9% note from Alan Albertson in payment of his account.
December 31 Accrued interest on the Albertson note.
February 12 Received the amount due from Albertson on his note.
Post.
Date Description Debit Credit
Ref.
ANSWER:
Nov. 14 Notes Receivable—Alan Albertson 4,800.00
Accounts Receivable—Alan 4,800.00
Albertson
Dec. 31 Interest Receivable 56.40

Interest Revenue 56.40
Feb. 12 Cash 4,908.00

Interest Receivable 56.40
Notes Receivable—Alan Albertson 4,800.00
Bloom's: Applying
BUSPROG: Analytic
157. For each of the following notes receivable held by Winter Company, determine the interest revenue to be reported on
the income statements. Round answers to nearest whole dollar.
Year 1 Year 2
Interest Interest
Date Face Rate Time Revenue Revenue
Aug. 8, Year 1 $15,000 7% 180 days
Oct. 7, Year 1 $22,000 8% 60 days
Jan. 6, Year 2 $30,000 8% 90 days
Nov. 12,Year 1 $28,000 9% 60 days
ANSWER:
Year 1 Year 2
Interest Interest
Date Face Rate Time
Revenue Revenue
Aug. 8, Year 1 $15,000 7% 180 days $423* $102**
Oct. 7, Year 1 $22,000 8% 60 days 293 0
Jan. 6, Year 2 $30,000 8% 90 days 0 600
Nov. 12, Year 1 $28,000 9% 60 days 343 77
*$15,000 × 0.07 × 145/360 = $423 (rounded)

**$15,000 × 0.07 × 180/360 = $525 – $423 = $102
Bloom's: Applying
BUSPROG: Analytic
158. Mr. Potts issued a 90-day, 7% note for $200,000, dated February 3 to Valley Co. on account. (Assume a 360-day
year when calculating interest.)
(b) Determine the interest.
(c) Determine the maturity value of the note.
(d) Journalize the entry to record the receipt of the note from Potts on Feb. 3.
(e) Journalize the entry to record the receipt of payment of the note at maturity by Valley Co.
ANSWER: (a) May 4

Feb. 4 - Feb. 28 25 days (28 – 3)
March 31 days
April 30 days
May 4 days
90 days
(b) Interest = Face Amount (or principal) × Rate × Time
Interest = $200,000 × 0.07 × 90/360
Interest = $3,500
(c) Maturity Value = Face Amount + Interest
Maturity Value = $200,000 + 3,500
Maturity Value = $203,500
(d) Notes Receivable—Mr. Potts 200,000
Accounts Receivable—Mr.Potts 200,000
(e) Cash 203,500
Notes Receivable—Mr. Potts 200,000
Bloom's: Applying

BUSPROG: Analytic
159. Lone Star Company received a 90-day, 6% note for $80,000, dated March 12 from a customer on account. (Assume a
360-day year when calculating interest.)
ANSWER: (a) June 10
determined as:
March 19 days (31 – 12)
April 30 days
May 31 days
June 10 days
Total 90 days
(b) $81,200 [$80,000 + ($80,000 6% – (90/360)]
(c)
June 10 Cash 81,200
Note Receivable 80,000
Bloom's: Applying
BUSPROG: Analytic
160. Watson Company issued a 60-day, 8% note for $18,000, dated April 5, to Laker Company on account. Assume a
360-day year when calculating interest.
(c) Journalize the entries to record the following:
(1) Receipt of the note by the payee
(2) Receipt by the payee of the amount due on the note at maturity. Round answers to the nearest $1.
ANSWER: (a) June 4
(b) $18,240
(c) Note Receivable—Watson Co. 18,000
Account Receivable—Watson Co. 18,000
Cash 18,240
Note Receivable—Watson Co. 18,000
DIFFICULTY: Easy
Bloom's: Applying

BUSPROG: Analytic
161. Journalize the following transactions (assume a 360-day year when calculating interest):
Mar. 1 Received a 90-day, 10% note for $24,000, dated March 1, from Batson Co. on
account.
May 30 The note of March 1 was dishonored.
ANSWER: Mar. 1 Notes receivable—Batson Co. 24,000
Accounts receivable—Batson Co. 24,000
May 30 Accounts Receivable—Batson Co. 24,600

Bloom's: Applying
BUSPROG: Analytic
162. Journalize the following transactions of Upton Drugs:

July 8 Received a $180,000, 90-day, 8% note dated July 8 from Miracle Chemical on
account.
Oct. 6 The note is dishonored by Miracle Chemical.
Nov. 5 Received the amount due on the dishonored note plus interest for 30 days at 10%
on the total amount charged to Miracle Chemical on Oct. 6.
ANSWER: July 8 Notes Receivable—Miracle Chemical 180,000
Accounts Receivable—Miracle Chemical 180,000
Oct. 6 Accounts Receivable—Miracle Chemical 183,600

Notes Receivable—Miracle Chemical 180,000
Nov. 5 Cash 185,130

Accounts Receivable—Miracle Chemical 183,600
Interest Revenue 1,530*
*$183,600 × 0.10 × 30/360 = $1,530

Bloom's: Applying
BUSPROG: Analytic
163. Journalize the following transactions for the Scott Company:
November 4 Received a $6,500, 90-day, 6% note from Tim's Co.in payment of the account.
December 31 Accrued interest on the Tim's Co. note.
February 2 Received the amount due from Tim's Co. on the note.
Post.
Date Description Debit Credit
Ref.
ANSWER:
Post.
Date Description Ref. Debit Credit
Nov. 4 Notes Receivable—Tim's Co. 6,500.00
Accounts Receivable—Tim's Co. 6,500.00
Dec.
31 Interest Receivable 61.75
Feb. 2 Cash 6,597.50

Interest receivable 61.75
Interest revenue 35.75
Notes receivable—Tim's Co. 6,500.00
$6,500 × 6% × 57/360 = $61.75

$6,500 × 6% × 33/360 = $35.75
Bloom's: Applying
BUSPROG: Analytic
164. For each of the following notes receivable held by Christensen Company determine the interest revenue to be
reported on the income statements for the year ended December 31. Round answers to nearest whole dollar.
Date Face Rate Time Interest Revenue

Aug. 8 $45,000 7% 45 days
Oct. 7 $62,000 5% 60 days
Jan. 6 $28,000 4% 120 days
Nov. 12 $43,000 6% 60 days
ANSWER:
Rate Time Interest
Date Face
Revenue
Aug. 8 $45,000 7% 45 days $394
Oct. 7 $62,000 5% 60 days $517
Jan. 6 $28,000 4% 120 days $373
Nov. 12 $43,000 6% 49 days $351
Bloom's: Applying
BUSPROG: Analytic
165. Journalize the following transactions in the accounts of Simmons Company:

Mar. 1 Received a $60,000, 60-day, 6% note dated March 1 from Bynum Company on account.
Mar. 18 Received a $25,000, 60-day, 9% note dated March 18 from Solo Company on account.
Apr. 30 The note dated March 1 from Bynum Company is dishonored, and the customer’s account is charged for the note,
including interest.
May 17 The note dated March 18 from Solo Company is dishonored, and the customer’s account is charged for the note,
including interest.
July 29 Cash is received for the amount due on the dishonored note dated March 1 plus interest for 90 days at 8% on the
total amount debited to Bynum Company on April 30.
Aug. 23 Wrote off against the allowance account the amount charged to Solo Company on May 17 for the dishonored
note dated March 18.
ANSWER: Mar.1 Notes Receivable—Bynum Co. 60,000
Accounts Receivable—Bynum Co. 60,000
18 Notes Receivable—Solo Co. 25,000

Accounts Receivable—Solo Co. 25,000
Apr. 30 Accounts Receivable—Bynum Co. 60,600

Notes Receivable—Bynum Co. 60,000
Interest Revenue 600*
*($60,000 × 6% × 60/360)
May 17 Accounts Receivable—Solo Co. 25,375

Notes Receivable—Solo Co. 25,000
Interest Revenue 375*
*($25,000 × 9% × 60/360)
July 29 Cash 61,812

Accounts Receivable—Bynum Co. 60,600
Interest Revenue 1,212*
*60,600 × 8% × 90/360 = $1,212
Aug.23 Allowance for Doubtful Accounts 25,375

Accounts Receivable—Solo Co. 25,375
Bloom's: Applying
FNMN.WARD.17.08-06 - LO: 08-06
BUSPROG: Analytic
166. On the basis of the following data related to assets due within one year for Simons Co., prepare a partial balance
sheet in good form at December 31. Show total current assets.
Cash $ 56,000
Accounts receivable 325,000
Allowance for doubtful accounts 25,000
Interest receivable 3,000
Supplies 4,000
Inventory 45,000
Other current assets 10,000
ANSWER:
Simons Co.
Balance Sheet
December 31
Assets
Current assets:
Cash $ 56,000
Accounts receivable $325,000
Allowance for doubtful accounts (25,000) 300,000
Inventory 45,000
Supplies 4,000
Other current assets 10,000
Total current assets $418,000
Bloom's: Applying
ACCT.ACBSP.APC.15 - Current Assets Reporting
BUSPROG: Analytic
167. On the basis of the following data related to assets due within one year for Webb Co., prepare a partial balance sheet
in good form at December 31. Show total current assets.
Cash $96,000
Notes receivable 50,000
Accounts receivable 275,000
Allowance for doubtful accounts 40,000
ANSWER:
Webb Co.
Balance Sheet
December 31
Assets
Current assets:
Cash $ 96,000
DIFFICULTY: Easy
Bloom's: Applying
BUSPROG: Analytic
168. The following are the current assets of Barnes Co. as of December 31:
Accounts Receivable $ 38,000
Cash 45,000
Interest Receivable 5,500
Inventory 88,000
Prepare the current assets section of the balance sheet.
ANSWER:
Barnes Co.
Balance Sheet
December 31
Assets
Current assets:
Cash $ 45,000
Merchandise inventory 88,000
Bloom's: Applying
BUSPROG: Analytic
169. Based on the following data and using a 365-day year, compute (a) the accounts receivable turnover and (b) the
number of days' sales in receivables for year 2 to 2 decimal places. The industry average turnover is 20 times during the
year, and the number of days' sales in receivables averages 25. (c) Comment on this situation.
12/31/Year 1 accounts receivable $ 100,000
12/31/Year 2 accounts receivable 70,000
For the year ended 12/31/Year 1, sales 1,050,000
For the year ended 12/31/Year 2, sales 1,200,000
ANSWER: (a) $1,200,000 ÷ [($100,000 + $70,000) ÷ 2] = 14.12
(b) [($70,000 + $100,000) ÷ 2] ÷ ($1,200,000 ÷ 365 days) = 25.85 days
(c) This situation is worse than the industry average.
Moderate
BUSPROG: Analytic
170. For the fiscal years 1 and 2, Grange Co. reported the following:
Year Ended December 31,
Year 1 Year 2
Sales $44,123,486 $34,124,961
Accounts receivable 749,321 719,365
(a) Compute the accounts receivable turnover for Year 2. Round to two decimals.
(b) Compute the number of days’ sales in receivables at the end of Year 2. Round to two decimals.
ANSWER: (a) Accounts receivable turnover = Net sales/Average accounts receivable

Accounts receivable turnover = $34,124,961/[($749,321 + $719,365)/2]
Accounts receivable turnover = 46.47
(b) Number of days’ sales in receivables = Avg. accounts receivable/Avg.

daily sales
Number of days’ sales in receivables = [($749,321 + $719,365)/2]/
($34,124,961/365 days)
Number of days’ sales in receivables = 7.85
Moderate
BUSPROG: Analytic
171. Financial statement data for the years ended December 31 for Parker Corporation are as follows:
Current Year Prior Year
Sales $2,595,600 $2,409,500
Accounts receivable:
Beginning of the year $390,000 $400,000
End of the year 434,000 390,000
(a) Determine the accounts receivable turnover for each year. Round to one decimal place.
(b) Determine the number of days’ sales in receivables for each year. Round to whole days.
(c) Does the change in accounts receivable turnover and number of days’ sales in receivables from
the first year to the second year indicate a favorable or unfavorable trend?
ANSWER: (a) Accounts receivable turnover:
Average accounts receivable:
($390,000 + $434,000)/2 $412,000
($400,000 + $390,000)/2 $395,000
Accounts Receivable Turnover:
$2,595,600/$412,000 6.3
$2,409,500/$395,000 6.1
(b) Number of days’ sales in receivables:
Average daily sales:
($2,595,600/365 days) $7,111
($2,409,500/365 days) $6,601
Number of days’ sales in receivables:

($412,000/$7,111) 58 days
($395,000/$6,601) 60 days
(c) The increase in the accounts receivable turnover from 6.1 to 6.3 times and the
decrease in number of days’ sales in receivables from 60 days to 58 days indicates a
favorable trend in the efficiency of collection of accounts receivable.
Bloom's: Applying
BUSPROG: Analytic
Match each description to the appropriate term (a-i).

a. Accounts receivable turnover
b. Net realizable value
c. Accounts receivable
d. Aging report
e. Receivables
f. Direct write-off method
g. Allowance for doubtful accounts
h. Bad debt expense
i. Factoring
DIFFICULTY: Easy
FNMN.WARD.17.08-02 - LO: 08-02
FNMN.WARD.17.08-04 - LO: 08-04
FNMN.WARD.17.08-08 - LO: 08-08
BUSPROG: Analytic
172. A receivable created from selling merchandise or services on account

ANSWER: c
173. A list of customer accounts sorted by age classes

ANSWER: d
174. A contra asset that represents the amount of estimated uncollectible receivables
ANSWER: g
175. Records bad debt expense only when a specific customer’s account is deemed worthless
ANSWER: f
176. Operating expense recorded as a result of receivables becoming uncollectible

ANSWER: h
177. The difference between accounts receivable and allowance for doubtful accounts
ANSWER: b
178. Term for selling receivables

ANSWER: i
179. All money claims against other entities
ANSWER: e
180. Measures how frequently during the year accounts receivable are being turned into cash
ANSWER: a
Match each description to the appropriate term (a-d). Each term may be used more than once.
a. Direct write-off method
b. Aging of receivables method
c. Percent of sales method
d. Allowance method
DIFFICULTY: Easy
FNMN.WARD.17.08-05 - LO: 08-05
BUSPROG: Analytic
181. This method records bad debts when specific accounts are deemed uncollectible.
ANSWER: a
182. When using this method, estimated bad debts are added to the existing allowance balance.
ANSWER: c
183. This method is most often used by small companies with few receivables.
ANSWER: a
184. This method is based on the theory that older accounts are less likely to be collected.
ANSWER: b
185. This method focuses on the balance sheet.

ANSWER: b
186. Offers two methods of estimating uncollectible accounts.

ANSWER: d
187. With this method, there is no allowance account.

ANSWER: a
188. This method focuses on the income statement.

ANSWER: c
Match each description to the appropriate term (a-h).
a. Face amount
b. Term
c. Interest
d. Maturity value
e. Dishonored note
f. Maker
g. Notes receivable
h. Interest rate
DIFFICULTY: Easy
BUSPROG: Analytic
189. A formal, written instrument of credit that represents amounts due from customers
ANSWER: g
190. The amount due that must be paid at the due date of a note receivable
ANSWER: d
191. The amount charged for using the money of another party
ANSWER: c
192. The stated rate charged for using the money of another party
ANSWER: h
193. A note that is not paid when it is due

ANSWER: e
194. The dollar amount stated on a promissory note

ANSWER: a
195. The party promising to pay a note

ANSWER: f
196. The time between the date a note is issued and the due date of the note
ANSWER: b

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Financial and Managerial Accounting 14th Edition Warren Test Bank

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Financial and Managerial Accounting

14th Edition Warren Test Bank

3. Other receivables include nontrade receivables such as loans to company officers.

LEARNING OBJECTIVES: FNMN.WARD.17.08-04 - LO: 08-04

LEARNING OBJECTIVES: FNMN.WARD.17.08-06 - LO: 08-06

32. The interest on a 6%, 60-day note for $5,000 is $300.

33. The party promising to pay a note at maturity is the maker.

LEARNING OBJECTIVES: FNMN.WARD.17.08-06 - LO: 08-06

39. When a note is written to settle an open account, no entry is necessary.

LEARNING OBJECTIVES: FNMN.WARD.17.08-06 - LO: 08-06

LEARNING OBJECTIVES: FNMN.WARD.17.08-01 - LO: 08-01

49. Which statement is not true?

51. If collection of an other receivable is expected beyond one year, it is classified as a

52. When does an account become uncollectible?

53. The direct write-off method of accounting for uncollectible accounts

55. An alternative name for Bad Debt Expense is

56. Two methods of accounting for uncollectible accounts are the

59. Selling receivables is called

a. debit Allowance for Doubtful Accounts; credit Accounts Receivable

a. Uncollectible Accounts Receivable

63. The direct write-off method:

DIFFICULTY: Bloom's: Remembering

DIFFICULTY: Bloom's: Applying

LEARNING OBJECTIVES: FNMN.WARD.17.08-04 - LO: 08-04

71. A debit balance in the Allowance for Doubtful Accounts

a. Bad Debt Expense 17,000

DIFFICULTY: Bloom's: Applying

a. allowance method based on aging the receivables

a. debit to Bad Debt Expense for $8,600

DIFFICULTY: Bloom's: Remembering

a. debit to Bad Debt Expense for $7,700

DIFFICULTY: Bloom's: Remembering

a. debit to Allowance for Doubtful Accounts for $3,200

DIFFICULTY: Bloom's: Remembering

a. will increase net income in the period it is collected

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

a. owners’ equity, credit

DIFFICULTY: Bloom's: Applying

113. When referring to a note receivable or promissory note

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

120. The accounts receivable turnover measures

121. The number of days' sales in receivables

Gross sales $150,000 Accounts receivable, beginning of year $18,000

Sales 135,000 Accounts receivable, end of year 22,000

a. $19,500 and $25,000

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

127. List at least three indicators that a receivable may be uncollectible.

1 Cost of Merchandise Sold 5,400

June 10 Cash 2,400

Oct. 11 Accounts Receivable—Jim Dobbs 4,800

May 10 Accounts Receivable—Andrew Warren 4,000

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

1 Cost of Merchandise Sold 5,400

June 10 Cash 2,400

Oct. 11 Accounts Receivable—Jim Dobbs 4,800