Fundamentals of Financial Accounting Canadian 5Th Edition Phillips Test Bank Full Chapter PDF

Fundamentals of Financial Accounting
Canadian 5th Edition Phillips Test Bank

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Chapter 08 - Receivables, Bad Debt Expense, and Interest Revenue
Chapter 08
Receivables, Bad Debt Expense, and Interest Revenue
True / False Questions
1. In a competitive market it is necessary to extend credit to at least some customers in order

to avoid losing market share to competitors.
TRUE
Accessibility: Keyboard Navigation

Blooms: Understand
Difficulty: Medium
Learning Objective: 08-01 Describe the trade-offs of extending credit.
Topic: 08-01 Advantages and Disadvantages of Extending Credit
2. There is a cost of extending credit to customers even when the company is able to collect
its accounts receivable in full.
TRUE

Blooms: Understand
Difficulty: Medium
3. Trade accounts receivable are created by selling goods or services on credit.

TRUE

Blooms: Remember
Difficulty: Easy
Learning Objective: 08-02 Estimate and report the effects of uncollectable accounts.
Topic: 08-02 Accounts Receivable and Bad Debts
8-1
4. Write-off method affects income statement as an additional expense is incurred when an

account is written-off.
FALSE

Blooms: Remember
Difficulty: Medium
Topic: 08-04 2. Remove (Write off) Specific Customer Balances
5. When bad debts exceed the amount estimated and written off in the previous accounting
period, the company is required to issue amended financial statements.
FALSE

Blooms: Remember
Difficulty: Medium
6. Under the aging of accounts receivable method, bad debt expense is calculated and then
added to the beginning balance in the allowance for doubtful accounts.
FALSE

Blooms: Understand
Difficulty: Medium
Topic: 08-08 Aging of Accounts Receivable Method
7. The allowance for doubtful accounts is a contra-asset account.

TRUE

Blooms: Remember
Difficulty: Easy
Topic: 08-03 1. Adjust for Estimated Bad Debts
8-2
8. The aging of accounts receivable method is based upon the principle that the longer an
account is overdue, the higher the risk of non-payment.
TRUE

Blooms: Remember
Difficulty: Medium
9. When the allowance method is used, the journal entry to write-off an uncollectible account
does not change the amount reported as net accounts receivable on the balance sheet.
TRUE

Blooms: Understand
Difficulty: Medium
Topic: 08-05 Summary of the Allowance Method
10. The two methods of accounting for bad debts that are acceptable under GAAP are the
allowance method and the direct write-off method.
FALSE

Blooms: Understand
Difficulty: Medium
Topic: 08-21 Supplement 8A: Direct Write-off Method
11. Interest on notes receivable is recorded as revenue when the cash is received.
FALSE

Blooms: Understand
Difficulty: Medium
Learning Objective: 08-03 Compute and report interest on notes receivable.
Topic: 08-10 Notes Receivable and Interest Revenue
8-3
12. The allowance for doubtful accounts is not used in the direct write off method.
TRUE

Blooms: Remember
Difficulty: Medium
Learning Objective: 08-S1 Record bad debts using the direct write-off method.
13. The amount of the principal of a notes receivable depends on the maturity date.
FALSE

Blooms: Understand
Difficulty: Easy
14. When a company receives an interest payment on a note, the entire payment must then be
recorded as revenue.
FALSE

Blooms: Understand
Difficulty: Medium
Topic: 08-15 Recording Interest Received
15. The receivables turnover ratio is calculated using the average net accounts receivable.
TRUE

Blooms: Remember
Difficulty: Easy
Learning Objective: 08-04 Compute and interpret the receivables turnover ratio.
Topic: 08-18 Receivables Turnover Analysis
8-4
16. The receivables turnover ratio indicates how many times, on average, the process of
selling to and collecting the sales proceeds from customers occurs during the accounting
period.
TRUE

Blooms: Understand
Difficulty: Easy
17. Companies of similar size operating in the same country tend to have similar receivables
turnover ratios.
FALSE

Blooms: Understand
Difficulty: Easy
Topic: 08-19 Comparison to Benchmarks
18. Analysts often interpret a sudden decline in the receivables turnover ratio as a signal of a
developing problem.
TRUE

Blooms: Understand
Difficulty: Medium
19. The smaller the receivables turnover ratio the larger the days to collect measure will be.
TRUE

Blooms: Understand
Difficulty: Medium
8-5
20. A higher receivables turnover ratio is a warning sign indicating that the company is
allowing a longer time period for customers to pay.
FALSE

Blooms: Understand
Difficulty: Medium
21. In normal circumstances, the allowance for doubtful accounts for a company should be a
fairly consistent percentage of gross accounts receivable.
TRUE

Blooms: Remember
Difficulty: Medium
22. Companies do not need to explain to financial statement users how uncollectable
receivables are accounted for because they do not need this information.
FALSE

Blooms: Remember
Difficulty: Easy
23. If the receivables turnover ratio rises significantly, the increase may be a signal that the
company is extending credit to high-risk borrowers or allowing an overly generous repayment
schedule.
FALSE

Blooms: Understand
Difficulty: Hard
8-6
24. Direct write-off method violates the matching principle.

TRUE

Blooms: Remember
Difficulty: Easy
25. Allowance for Doubtful Accounts is a contra-asset account.

TRUE

Blooms: Remember
Difficulty: Easy
26. Allowance for Doubtful Accounts is a temporary account.

FALSE

Blooms: Remember
Difficulty: Easy
27. Bad Debt Expense is a temporary account.

TRUE

Blooms: Understand
Difficulty: Easy
8-7
28. The balance in the Allowance for Doubtful Accounts will always differ from the balance
in Bad Debt Expense.
FALSE

Blooms: Understand
Difficulty: Easy
29. A subsidiary account refers to an account that is to be written off.

FALSE

Blooms: Understand
Difficulty: Medium
30. Both the percentage of credit sales and aging of accounts receivable methods are
acceptable under ASPE and IFRS.
TRUE

Blooms: Understand
Difficulty: Medium
31. The direct write-off method is acceptable under IFRS, but not under ASPE.
FALSE

Blooms: Understand
Difficulty: Medium
8-8
32. All else being equal, net sales revenue and days to collect have an inverse relationship.
FALSE

Blooms: Understand
Difficulty: Medium
33. All else being equal, an increase in the average net receivables necessarily implies an
increase in days to collect.
TRUE

Blooms: Understand
Difficulty: Medium
34. The collection of a note receivable is accounted for like the collection of an account
receivable.
TRUE

Blooms: Understand
Difficulty: Easy
Topic: 08-16 Recording Principal Received
8-9
Multiple Choice Questions
35. A company extends credit to customers because it expects the:

A. benefits from the rise in sales revenue to be greater than the cost of extending credit.
B. interest charged to be greater than the cost of extending credit.
C. tax savings from a lower net income to be greater than the cost of extending credit.
D. because its borrowing cost is lower than the cost of extending credit.

Blooms: Understand
Difficulty: Medium
36. If a company did not extend credit to customers:

A. its gross revenue would rise.
B. its costs of credit would rise but so would its revenue.
C. its costs of credit would fall but so would its revenue.
D. gross profit would rise.

Blooms: Understand
Difficulty: Medium
37. Extending credit to customers will result in which of the following additional costs?
A. Increased employer costs will be incurred to evaluate customer credit worthiness, track
what each customer owes, and follow up to ensure correction.
B. Bad debt expense will result when amounts cannot be collected from customers.
C. Delayed receipt of cash may result requiring the company to take out short-term loans and
incur interest costs.
D. All of the answers are acceptable.

Blooms: Understand
Difficulty: Medium
8-10
38. Which of the following methods is required by Canada Revenue Agency for accounting
for bad debt for tax purposes:
A. Direct write-off method
B. Allowance method
C. Percentage of sales method
D. Aging of accounts method

Blooms: Remember
Difficulty: Easy
Topic: 08-09 Other Issues
39. Companies are concerned about the cost of extending credit for all the following reasons
EXCEPT:
A. the time delay in receiving payment.
B. the expense of the extra goods that must be produced or bought.
C. the risk of non-payment.
D. the administrative costs associated with extending credit.

Blooms: Understand
Difficulty: Medium
8-11
40. Assume the Mirtha Company had the following balances at year-end.
From the Balance Sheet 2018 2017

Accounts Receivable 1,560,200 1,210,920
Allowance for Doubtful Accounts (79,000) (64,600)
Accounts Receivable, Net 1,481,200 1,146,320
Assume the company recorded no write-offs or recoveries during 2018. What was the amount
of bad debt expense reported in 2018?
A. $79,000.
B. $64,600.
C. $28,800.
D. $14,400.
If there were no write-offs or recoveries during 2018, then the change in the allowance
account was solely due to debt expense in 2018, which would be the difference between the
balance in allowance for doubtful accounts: 79,000 - 64,600 = 14,400.

Blooms: Apply
Difficulty: Easy
41. Purrfect Pets sells a $1,500 aquarium to a customer on account. This would be recorded
under:
A. non-trade receivables.
B. cash.
C. trade accounts receivable.
D. notes receivable.

Blooms: Understand
Difficulty: Easy
8-12
42. The Grass is Greener Corporation provides $6,000 worth of lawn care on account during
the month. Experience suggests that about 2% of net credit sales will not be paid. According
to the revenue recognition principle and the expense recognition principle, the company
should:
A. record an estimate of bad debt expense in the same period as the lawn care is provided.
B. not report the sales revenue until it collects payment.
C. increase the value of its liabilities with an adjustment.
D. all of the answers are acceptable.

Blooms: Understand
Difficulty: Medium
43. An Allowance for Doubtful Accounts is a contra-account paired with:

A. expenses.
B. cash.
C. net income.
D. accounts receivable.

Blooms: Remember
Difficulty: Medium
8-13
44. The Grass is Greener Corporation provides $6,000 worth of lawn care on account during
the month. Experience suggests that about 2% of net credit sales will not be paid. To record
the potential bad debts, The Grass is Greener Corporation would:
A. debit Accounts Receivable and credit Allowance for Doubtful Accounts for $120.
B. debit Allowance for Doubtful Accounts and credit Bad Debt Expense for $120.
C. debit Bad Debt Expense and credit Allowance for Doubtful Accounts for $120.
D. debit Bad Debt Expense and credit Accounts Receivable for $120.
Using the allowance method, Bad Debt Expense is debited and the contra-asset account,
Allowance for Doubtful Accounts, is credited for $120 ($6,000 * .02).

Blooms: Understand
Difficulty: Medium
45. At the end of the accounting period, The Grass is Greener Corporation learns that a
customer who owes $350 has gone bankrupt and payment will not be made. The Grass is
Greener Corporation should:
A. debit Bad Debt Expense and credit Accounts Receivable for $350.
B. debit the Allowance for Doubtful Accounts and credit Accounts Receivable for $350.
C. debit Bad Debt Expense and credit Cash for $350.
D. debit Accounts Receivable and credit Bad Debt Expense for $350.

Blooms: Understand
Difficulty: Medium
8-14
46. When an adjusting entry is made in anticipation of some receivables being uncollectible
the adjustment reduces:
A. both net income and net accounts receivable.
B. net income and increases liabilities.
C. net accounts receivable and increases liabilities.
D. net income and selling expenses.

Blooms: Understand
Difficulty: Medium
47. Over the past five years, a company had average annual credit sales of $320,000 and an
average annual net write-offs of $2,000. Credit sales in the current year are $300,000. Using
the percentage of credit sales method, what should the company record as an estimate of bad
debt expense?
A. $2,000
B. $1,875
C. $20,000
D. $6,000
Estimated average uncollectible% = $2,000/$320,000 = .00625

Bad Debt Expense = estimated uncollectible% * Credit Sales
= .00625 * $300,000 = $1,875.

Blooms: Apply
Difficulty: Medium
Topic: 08-07 Percentage of Credit Sales Method
8-15
48. When a company that uses the allowance method writes off an actual bad debt:
A. total assets decrease.
B. total liabilities increase.
C. total expenses increase and total revenues increase.
D. total assets, revenue, and expenses remain the same.

Blooms: Understand
Difficulty: Hard
49.
Johnstone Supplies, Inc. Accounts Receivable Aging Report, July 31, 2018
Accounts receivable by due date Account Total Estimated % uncollectible
Not yet due $126,500 2%
1-30 days past due $89,200 12%
31-60 days past due $53,600 18%
Over 60 days past due $31,800 35%
The unadjusted balance of the allowance for doubtful accounts of Johnstone Supplies, Inc., is
$28,947 on July 31, 2018. Based on the accounts receivable aging report, bad debt expense
will be:
A. $34,012.
B. $5,065.
C. $62,959.
D. $50,434.
Accounts Receivable Aging Report

Act Rec. by due date Account Total Estimated % Estimated Amount
uncollectible uncollectible
Not yet due $126,500 2% $2,530
1-30 days past due $89,200 12% $10,704
31-60 days past due $53,600 18% $9,648
Over 60 days past due $31,800 35% $11,130
$34,012
8-16
34,012 - 28,947 = 5,065.

Blooms: Analyze
Difficulty: Hard
50.
Johnstone Supplies, Inc. Accounts Receivable Aging Report, July 31, 2018
Accounts receivable by due date Account Total Estimated % uncollectible
Not yet due $126,500 2%
1-30 days past due $89,200 12%
31-60 days past due $53,600 18%
Over 60 days past due $31,800 35%
If Johnstone Supplies, Inc., writes off $3,081 of un-collectible accounts during August, 2018,
the unadjusted balance in the allowance for doubtful accounts account on August 31, 2018
will be:
A. $30,931.
B. $5,065.
C. $34,012.
D. $1,984.
The July 31 adjusted balance in the allowance account minus the write-off in August equals
the unadjusted balance at the end of August.
$34,012 - $3,081 = $30,931 unadjusted balance.

Blooms: Analyze
Difficulty: Hard
8-17
51. Your company wrote off $350 in accounts receivable two months ago when a customer
went bankrupt. That customer reorganizes and now pays the $350. Your company should:
A. debit Bad Debt Expense and credit Cash.
B. debit Accounts Receivable and credit Bad Debt Expense and then debit Allowance for
Doubtful Accounts and credit Cash.
C. debit Cash and credit Bad Debt Expense.
D. debit Accounts Receivable and credit Allowance for Doubtful Accounts and then debit
Cash and credit Accounts Receivable.

Blooms: Understand
Difficulty: Medium
52. Net accounts receivable is:

A. gross accounts receivable minus cost of goods sold.
B. also known as net pre-tax income.
C. gross accounts receivable minus allowance for doubtful accounts.
D. also known as net after-tax income.

Blooms: Remember
Difficulty: Medium
53. Your company previously averaged about 20% of its total accounts receivable in the "over
90 days past due" category and now has 35% in this category. All else equal, using the aging
of accounts receivable method, the amount of the bad debt adjustment will:
A. fall, increasing the ending balance of the allowance account.
B. rise, increasing the ending balance of the allowance account.
C. fall, decreasing the ending balance of the allowance account.
D. rise, decreasing the ending balance of the allowance account.

Blooms: Understand
Difficulty: Hard
8-18
54. On average, 5% of credit sales has been uncollectible in the past. At the end of the year,
the balance of accounts receivable is $100,000 and the allowance for doubtful accounts has a
credit balance of $500. Net credit sales during the year were $150,000. Using the percentage
of credit sales method, the estimated bad debt expense would be:
A. $5,000.
B. $7,000.
C. $7,500.
D. Cannot be determined; the percent of credit sales method cannot be used, as the
information provided can only be used for calculating the aging of accounts receivable
method.
$150,000 * .05 = $7,500.

Blooms: Analyze
Difficulty: Medium
55. On average, 5% of total accounts receivable has been uncollectible in the past. At the end
of the year, the balance of accounts receivable is $100,000 and the allowance for doubtful
accounts has a credit balance of $500. Credit sales during the year were $150,000. Using the
aging of accounts receivable method, the estimated bad debt expense would be:
A. $4,500.
B. $5,000.
C. $5,500.
D. Cannot be determined; the aging of accounts receivable method cannot be used as the
information provided can only be used for calculating the percentage of credit sales method.

Blooms: Analyze
Difficulty: Hard
8-19
56. Before adjustment, the allowance for doubtful accounts has a credit balance of $2,700.
The company had $140,000 of net credit sales during the period and historically fails to
collect 4% of credit sales. The company uses the percentage of credit sales method of
estimating doubtful accounts. After adjusting for estimated bad debts, the new balance in the
allowance for doubtful accounts account will be:
A. $8,300.
B. $5,400.
C. $2,900.
D. Cannot be determined from the information given.
The balance in the allowance account will be increased by the amount of the bad debt expense
recorded at the end of the year.
$140,000 * .04 = $5,600
$5600 + 2,700 = $8,300.

Blooms: Analyze
Difficulty: Medium
57. During the year, a company concludes that $6,844 of specific customer accounts will not
be collected. These are written off by:
A. debiting Accounts Receivable and crediting Allowance for Doubtful Accounts for $6,844.
B. debiting Accounts Receivable and crediting Bad Debt Expense for $6,844.
C. debiting Bad Debt Expense and crediting Accounts Receivable for $6,844.
D. debiting Allowance for Doubtful Accounts and crediting Accounts Receivable for $6,844.

Blooms: Understand
Difficulty: Medium
8-20
58. Your company has averaged about 26% of its accounts receivable in the "over 90 days
past due" category and now forecasts 18% in this category. You use the aging of accounts
receivable method of estimating bad debt expense. If the total of credit sales remains
unchanged from previous months and no write offs are made, the estimate of bad expense
based on the new forecast will:
A. increase over the estimate for previous months.
B. decrease over the estimate for previous months.
C. not change.
D. will depend on the percentage of credit sales deemed un-collectible.

Blooms: Understand
Difficulty: Hard
59. The beginning balance in the allowance for doubtful accounts is $12,656 and the ending
balance is $14,348. If bad debt expense was $3,879, which of the following statements is
true?
A. The allowance account was retroactively debited $2,187 for additional bad debts that
became apparent in a future time period.
B. The allowance account was debited $2,187 for write-offs of actual bad debts.
C. The allowance account was credited $2,187 for recoveries of bad debts.
D. The allowance account was credited $2,187 for the difference between the percent of credit
sales method and the aging of accounts receivable method.
Allowance for doubtful accounts will be credited for the current period's estimate of bad debts
expense. An unexplained debit to the account must have resulted from the write off of specific
accounts receivable during the year.
Allowance For Doubtful Acts

$12,656
$3,879
$2,187
$14,348
8-21

Blooms: Analyze
Difficulty: Medium
60. When a company makes an adjustment in anticipation of future uncollectible debt:

A. it debits an asset account and credits a liability account.
B. it debits a revenue account and credits an asset account.
C. it debits a revenue account and credits an expense account.
D. it debits an expense account and credits a contra-asset account.

Blooms: Understand
Difficulty: Medium
61. If an uncollectible account, previously written off, is recovered:

A. net accounts receivable increases.
B. net accounts receivable decreases.
C. net accounts receivable stays the same.
D. total revenues increase.

Blooms: Understand
Difficulty: Hard
Topic: 08-09 Other Issues
8-22
62. Your company uses the percentage of credit sales method for calculating bad debt
expense. If your company has $216,000 in total sales, of which $178,000 are on credit, and its
historical bad debt loss is 6% of credit sales, bad debt expense:
A. is $12,960.
B. is $10,680.
C. is $38,000.
D. cannot be determined from the information given.
The % of credit sales method estimates bad debt expense by multiplying the historical % by
the current period's credit sales. Any existing balance in the allowance account is ignored.
$178,000 * .06 = $10, 680.

Blooms: Apply
Difficulty: Medium
63. To record estimated uncollectible accounts using the allowance method for uncollectible
accounts, the adjusting entry would be a debit to:
A. Accounts Receivable and a credit to Allowance for Doubtful Accounts.
B. Bad Debts Expense and a credit to Allowance for Doubtful Accounts.
C. Allowance for Doubtful Accounts and a credit to Accounts Receivable.
D. Loss on Credit Sales and a credit to Accounts Receivable.

Blooms: Understand
Difficulty: Easy
8-23
64. On the balance sheet, the allowance for doubtful accounts:

A. is included in current liabilities.
B. increases the reported net value of accounts receivable.
C. appears under the heading "Other Assets."
D. is deducted from accounts receivable.

Blooms: Remember
Difficulty: Easy
65. The amount of uncollectible accounts at the end of the year is estimated, using the aging
of receivables method, to be $25,000. The balance in the Allowance for Doubtful Accounts
account is an $8,000 credit before adjustment. What should the balance in the Allowance for
Doubtful Accounts account be after adjustment?
A. $8,000.
B. $17,000.
C. $25,000.
D. $33,000.
25,000 - 8,000 = 17,000

After adjustment, the balance in the allowance account should be $25,000. Since the balance
before adjustment is $8,000, bad debt expense of $17,000 must be recorded to bring the
allowance account to the desired ending balance of $25,000.

Blooms: Apply
Difficulty: Easy
8-24
66. The amount of uncollectible accounts at the end of the year is estimated, using the aging
of receivables method, to be $25,000. The balance in the Allowance for Doubtful Accounts
account is an $8,000 credit before adjustment. Assuming no accounts are written off during
the period, what will be the amount of bad debts expense for the period?
A. $8,000.
B. $17,000.
C. $25,000.
D. $33,000.
The amount of bad debt expense would be the difference between $25,000 and $8,000.
AFDA
$8,000
$17,000
$25,000

Blooms: Apply
Difficulty: Medium
8-25
67. In 2017, Lawrence Company had gross sales of $750,000 on account and granted sales
discounts of $15,000. On January 1, 2017, the Allowance for Doubtful Accounts account had
a credit balance of $18,000. During 2017, $30,000 of uncollectible accounts receivable were
written off. Past experiences indicate that 3% of net credit sales become uncollectible. Using
the percentage of net credit sales method, what would be the adjusted balance in the
Allowance for Doubtful Accounts at December 31, 2017?
A. $10,050.
B. $10,500.
C. $22,050.
D. $34,500.
$735,000 * .03 = $22, 050

30,000 - (18000 + 22,050) = 10,050.

Blooms: Analyze
Difficulty: Hard
68. Plasma Inc., has net credit sales of $500,000 during the year. Based on historical
information, Plasma estimates that 2% of net credit sales result in bad debts. At the beginning
of the year, Plasma has a credit balance in its Allowance for Doubtful Accounts of $4,000.
What amount of bad debt expense should Plasma recognize for the year, assuming no specific
customer accounts were written off?
A. $4,000.
B. $6,000.
C. $10,000.
D. $14,000.
When the % of credit sales method is used, the amount of the entry to record Bad Debt
Expense is based on the historical % of bad debt losses and is not adjusted for any balance in
the allowance for doubtful accounts.
$500,000 * .02 = 10,000.

Blooms: Apply
Difficulty: Medium
8-26
69. As of December 31, Frappa Company has a balance of $5,000 in accounts receivable. Of
this amount $500 is past due and the remainder is not yet due. Frappa has a credit balance of
$45 in the allowance for doubtful accounts. Frappa Company estimates its bad debt losses
using the aging of receivables method, with estimated bad debt loss rates equal to 1% of
accounts not yet due and 10% of past due accounts. How would the required adjusting journal
entry be recorded in the Allowance for Doubtful Accounts?
A. $95 (credit).
B. $55 (credit).
C. $50 (credit).
D. $45 (debit).
Using the aging method, bad debt expense equals the estimated amount of uncollectible
accounts based on the aging report minus the credit balance in the allowance for doubtful
accounts. $95 - $45 = $50
Accounts Receivable Aging

Act Receivable by due Account Estimated % Estimated
date Total uncollectible Amount
uncollectible
Not yet due $4,500 1% $45
Past due $500 10% $50
Total $95

Blooms: Analyze
Difficulty: Medium
8-27
70. Total doubtful accounts at the end of the year is estimated, using the aging of receivables
method, to be $25,000. If the balance for the Allowance for Doubtful Accounts is a $7,000
debit before adjustment, what will be the amount of bad debts expense for the period?
A. $7,000.
B. $18,000.
C. $25,000.
D. $32,000.
The unadjusted debit balance of $7,000 in the allowance account will require a credit of
$32,000 to achieve the desired credit balance of $25,000.
AFDA
7,000
32,000 Bad debt Exp Adjustment
25,000 Ending Balance

Blooms: Apply
Difficulty: Medium
71. In reviewing the accounts receivable, the net receivable value is $17,000 before writing
off a $1,500 account. What is the net receivable value after the write-off?
A. $17,000.
B. $1,500.
C. $18,500.
D. $15,500.

Blooms: Apply
Difficulty: Medium
8-28
72. IBM signs an agreement to lend one of its customers $200,000 to be paid back in one year
at 5.5% interest. IBM would record this loan under:
A. loans payable.
B. accounts receivable.
C. notes receivable.
D. unearned revenue.

Blooms: Understand
Difficulty: Easy
73. In the normal formula for interest calculation, the interest rate is on a(n) _____ basis and
therefore the time variable must reflect how many _____ out of _____ in the interest period.
A. biannual; months; 6
B. annual; years; 1
C. biannual; half-years; 2
D. annual; months; 12

Blooms: Understand
Difficulty: Easy
Topic: 08-11 Calculating Interest
74. On January 1, a company lends a corporate customer $80,000 at 6% interest. The amount
of interest revenue that should be recorded for the first quarter is:
A. $4,800.
B. $1,200.
C. $400.
D. $1,600.
One quarter is 3 months, so the time period is 3/12. $80,000 * .06 * 3/12 = $1,200

Blooms: Understand
Difficulty: Medium
8-29
75. When a company lends cash to a customer who then signs a promissory note:
A. net income decreases for the current accounting period, but increases when the money is
repaid.
B. expenses increase in the current accounting period but revenues increase when the money
is repaid.
C. liabilities increase when the transaction occurs but decrease when the money is repaid.
D. net assets and net income do not change when the transaction occurs.

Blooms: Understand
Difficulty: Easy
Topic: 08-12 Recording Notes Receivable and Interest Revenue
76. When interest is calculated for periods shorter than a year, the formula to calculate interest
is I = P  R  T, where:
A. I = interest calculated, P = principal, R = annual interest rate, and T = number of months.
B. I = interest calculated, P = principal, R = annual interest rate, and T = (number of months 
12)
C. I = interest calculated, P = principal, R = monthly interest rate, and T = (number of months
 12).
D. none of the choices are correct.

Blooms: Understand
Difficulty: Medium
8-30
77. A company lends its CEO $150,000 for 3 years at a 6% annual interest rate. Interest
payments are to be made twice a year. Each interest payment will be:
A. $9,000.
B. $750.
C. $4,500.
D. $1,500.
Each interest payment is equal to 6/12 of the annual interest amount. 150,000 * .06 * 6/12 =
$4,500.

Blooms: Apply
Difficulty: Medium
78. A company lends its CEO $150,000 for 3 years at a 6% annual interest rate. Interest
payments are to be made twice a year. The company initially records the transaction by:
A. debiting Notes Receivable for $150,000 and crediting Cash for $150,000.
B. debiting assets for $150,000 and crediting liabilities for $150,000.
C. debiting Cash for $9,000 and crediting Interest Revenue for $9,000.
D. debiting Interest Receivable for $4,500 and crediting Interest Revenue for $4,500.

Blooms: Understand
Difficulty: Medium
8-31
79. A company lends a major client $90,000 for one year at a 7% annual interest rate. Interest
payments are to be made twice a year but the company wants to recognize interest earned on a
monthly basis. In a month in which the company does not receive any interest payments,
interest is recorded with:
A. a debit to Cash of $525 and a credit to Interest Revenue of $525.
B. a debit to Notes Receivable of $525 and a credit to Cash of $525.
C. a debit to Interest Receivable of $525 and a credit to Interest Revenue of $525.
D. no adjusting entry, since no transaction has occurred.
If no cash is received but the interest is earned, the adjusting entry will be an increase to
interest receivable (debit) and an increase to interest revenue (credit). $90,000 * .07 * 1/12 =
$525.

Blooms: Apply
Difficulty: Hard
80. A company lends a major client $90,000 for one year at a 7% annual interest rate. Interest
payments are to be made twice a year. In July, the company receives an interest payment for
January through June. The company would record receipt of the interest payment in which of
the following ways?
A. Debit Interest Receivable for $3,150 and credit Interest Revenue for $3,150.
B. Debit Cash for $3,150 and credit Notes Receivable for $3,150.
C. Debit Interest Revenue for $3,150 and credit Cash for $3,150.
D. Debit Cash for $3,150 and credit Interest Receivable for $3,150.
If monthly entries have been made to accrue the interest earned, then 6 months of interest has
already been recorded as Interest Revenue and Interest Receivable. So when the payment is
received, the interest receivable is decreased (credited) and Cash is increased (debited).
90,000 * .07 * 6/12 = $3,150.

Blooms: Apply
Difficulty: Hard
8-32
81. Company A lends $100,000 to Company B. The interest on the loan is reported:
A. as an expense to Company A and a revenue to Company B.
B. as an asset to Company A and a revenue to Company B.
C. as an asset to Company B and a liability to Company A.
D. as an expense to Company B and a revenue to Company A.

Blooms: Understand
Difficulty: Easy
82. On January 31, 2017, Purrfect Pets receives a $4,680 interest payment on a note
receivable representing two months of accumulated interest. One month of this interest was
accrued during the year ended December 31, 2017. Upon receiving the payment, the company
would:
A. debit Interest Receivable for $2,340, debit Cash $2,340, and credit Interest Revenue for
$4,680.
B. debit Cash for $4,680, credit Interest Revenue for $2,340, and credit Interest Receivable
for $2,340.
C. debit Cash for $2,340, debit Interest Receivable for $2,340, and credit Interest Revenue for
$2,340.
D. debit Interest Revenue for $2,340 and credit Cash for $2,340.

Blooms: Understand
Difficulty: Medium
8-33
83. Your company lent a customer $5,000 to satisfy the customer's overdue accounts
receivable. The loan is for one year at an annual interest rate of 5%. Six months later the
customer repays the principal and interest. The principal part of the repayment should be
recorded as a:
A. debit to Cash and credit to Notes Receivable.
B. debit to Notes Receivable and credit to Interest Revenue.
C. debit to Cash and credit to Accounts Receivable.
D. debit to Allowance for Bad Debts and credit to Cash.

Blooms: Understand
Difficulty: Medium
Topic: 08-16 Recording Principal Received
84. On July 1, 2017, Icepresso Inc. signed a two-year $8,000 note receivable with 9 percent
interest. At its due date, July 1, 2017, the principal and interest will be received in full.
Interest revenue should be reported on Icepresso's income statement for the year ended
December 31, 2017, in the amount of:
A. $1,440.
B. $720.
C. $420.
D. $360.
July 1 to December 31 is 6 months, so 6/12 of the annual interest must be accrued. $8000 *
.09 * 6/12 = 360.

Blooms: Apply
Difficulty: Medium
Topic: 08-14 Accruing Interest Earned
8-34
85. Which of the following is true?

A. Accounts receivable fall as companies sell on credit.
B. Accounts receivable rise as companies receive payment.
C. Receivables turnover refers to how fast receivables are collected.

Blooms: Understand
Difficulty: Medium
86. How are net income and the accounts receivable turnover ratio affected when a customer
account balance, which is known to be uncollectible, is written off? Assuming the company is
using allowance method.
A. Net income and accounts receivable turnover ratio decrease
B. Net income decreases; no change in accounts receivable turnover ratio
C. No change in net income; accounts receivable turnover ratio decreases
D. No change in net income or accounts receivable turnover ratio

Blooms: Analyze
Difficulty: Hard
87. A high accounts receivable turnover ratio indicates:

A. the company's sales are increasing.
B. a large proportion of the company's sales are on credit.
C. customers are making payments very quickly.
D. the company is taking longer to sell inventory.

Blooms: Understand
Difficulty: Medium
8-35
88. Momentum Products Inc., just recorded an adjusting journal entry for the current year's
estimate of bad debts. Assuming all else is equal, this adjusting journal entry will cause:
A. the accounts receivable turnover ratio to increase.
B. net income to increase.
C. total assets to remain unchanged.
D. none of the answers are acceptable.

Blooms: Understand
Difficulty: Hard
89. Receivables might be sold ("factored") to:

A. lengthen the time to collect from customers.
B. reduce the receivables turnover ratio.
C. generate cash quickly.
D. generate a gain on sale.

Blooms: Understand
Difficulty: Medium
Topic: 08-20 Speeding up Collections
90. The receivables turnover ratio indicates:

A. the average number of days from the time a sale is made on account to the time cash is
collected.
B. the average number of days from the time a sale is made on account to the time payment is
due.
C. how many times a year receivables go uncollected.
D. how fast receivables are collected.

Blooms: Remember
Difficulty: Medium
8-36
91. The days-to-collect measure indicates:

A. the number of days an average selling and collecting cycle takes.
B. the average number of times the firm completes the selling and collecting cycle during the
year.
C. the average number of days for a customer's payment to clear the banking system.
D. the average number of days before the company receives a customer's payment and uses
the cash to re-order merchandise.

Blooms: Remember
Difficulty: Medium
92. Which of the following statements is true?

A. The receivables turnover ratio indicates the average number of times the company
completes the selling and collecting cycle during the year.
B. The days-to-collect measure is 365 divided by the receivables turnover ratio.
C. The receivables turnover ratio and days-to-collect measure move in opposite directions.

Blooms: Understand
Difficulty: Easy
8-37
93. Your company has net sales of $468,300 and average trade receivables of $111,500 for
the year. Which of the following is true?
A. The receivables turnover ratio is 4.2 and the days-to-collect is 0.012.
B. The receivables turnover ratio is.24 and the days-to-collect is 1,520.
C. The receivables turnover ratio is 4.2 and the days-to-collect is 86.9.
D. The receivables turnover ratio is.24 and the days-to-collect is 87.6.
Receivables Turnover Ratio = 468,300/111, 500 = 4.2

Days to collect = 365/4.2 = 86.9.

Blooms: Analyze
Difficulty: Medium
94. At the end of the first year, the Treadwell Tire Company had accounts receivable of
$67,900 and at the end of the second year the company had accounts receivable of $72,400. If
the company's net sales revenue during the second year was $876,875, the receivables
turnover ratio for the second year was:
A. 12.5.
B. 29.2.
C. 0.08.
D. 0.034.
Avg. Net Receivables = (67,900 + 72,400)/2 = 70, 150

Receivables Turnover Ratio = 876,875/70,150 = 12.5.

Blooms: Apply
Difficulty: Medium
8-38
95. At the end of the third year, the Treadwell Tire Company had accounts receivable of
$66,600, and at the end of the fourth year, the company had accounts receivable of $72,600. If
the company's net sales revenue during the fourth year were $876,000, the days- to -collect
during year four was:
A. 12.
B. 29.
C. 8.
D. 34.
Receivables Turnover = Net sales/Average net accounts receivable

$876,000/[($66,600 + $72,600)/2] = 12.6 (rounded)
Days to Collect = 365/receivables turnover
29 (rounded) = 365/12.6.

Blooms: Analyze
Difficulty: Medium
96. The Grass is Greener Corporation's receivables turnover ratio decreases from 14.1 to 11.8.
Which of the following statements is true?
A. This indicates that the company is taking longer to collect credit payments.
B. This is an indication that the company is experiencing falling credit costs.
C. This could be an indication that the company is using more efficient collection methods.
D. This is an indication that the company is buying and selling financial assets less rapidly.

Blooms: Understand
Difficulty: Medium
8-39
97. The receivables turnover ratio of Purrfect Pets, Inc. increases from 10.2 to 13.6. Which of
the following statements is true?
A. This indicates that the company is taking longer to collect credit payments.
B. This is an indication that the company is experiencing rising credit costs.
C. This could be an indication that the company is using more efficient collection methods.
D. This is an indication that the company is buying and selling financial assets more rapidly.

Blooms: Understand
Difficulty: Medium
98. The days- to- collect increases from 32 to 48. Which of the following statements is true?
A. The company is likely to see its bad debt expense fall.
B. The receivables turnover rate rises by 50%.
C. The company is becoming more efficient at collecting payment.
D. The receivables turnover rate falls from approximately 11.4 to 7.6.
When days-to-collect increases, the receivables turnover will decrease. If days to collect is 32
then the receivables turnover is 365/32 = 11.4 and if the days to collect is 48 then the
receivables turnover is 365/48 = 7.6. A decrease in receivable turnover does not indicate
greater efficiency neither does it indicates a fall in bad debt expense.

Blooms: Understand
Difficulty: Medium
99. All other things equal, a company is better off when its receivable turnover ratio:
A. and its days-to-collect measure are both low.
B. is high and its days-to-collect measure is low.
C. and its days-to-collect measure are both high.
D. is low and its days-to-collect measure is high.

Blooms: Understand
Difficulty: Easy
8-40
100. Which of the following method is not acceptable under both IFRS and ASPE?
A. Percentage of sales method
B. Direct write-off method
C. Aging of accounts receivable
D. None of the above

Blooms: Remember
Difficulty: Easy
101. If a company is overly optimistic about debt collection, the company will understate bad
debt expense and:
A. overstate net income; and days to collect will fall.
B. overstate net income; and days to collect will rise.
C. understate net income; and days to collect will rise.
D. understate net income; and days to collect will fall.

Blooms: Understand
Difficulty: Hard
102. A company had sales revenue of $13,900 in the first quarter (Q1) and $11,500 in the
second quarter (Q2). The company's expenses (including bad debt expense) were $7,300 in
Q1 and $6,900 in Q2. If the company raised its bad debt expense estimate by $800 in Q1 and
lowered it by $800 in Q2, which of the following would be true assuming all else equal?
A. Q1 net income would fall $800 and Q2 net income would rise $1,600.
B. Q1 net income would fall $1,600 and Q2 net income would rise $1,600.
C. Q1 net income would fall $800 and Q2 net income would rise $800.
D. Q1 net income would fall $1,600 and Q2 net income would rise $800.

Blooms: Analyze
Difficulty: Hard
Topic: 08-06 Methods for Estimating Bad Debts
8-41
103. If a company attempts to artificially inflate current sales and net income by shipping
goods that have not been ordered, we would expect that the receivables turnover ratio will:
A. rise and the days-to-collect will rise, all other things equal.
B. rise and the days-to-collect will fall, all other things equal.
C. fall and the days-to-collect will fall, all other things equal.
D. fall and the days-to-collect will rise, all other things equal.

Blooms: Understand
Difficulty: Hard
104. Factors that might cause a company to adjust the percentage(s) used to estimate bad
debts might include:
A. the state of the local economy in the customer's area.
B. the credit ratings of its customers.
C. the current situation in the customers' industry or industries.
D. all of the answers are acceptable.

Blooms: Remember
Difficulty: Easy
Topic: 08-06 Methods for Estimating Bad Debts
105. Companies A and B both report net income growing at 12% per year. Company A has a
receivables turnover ratio of 5.6, which is smaller than its previous year. Company B has a
receivables turnover ratio of 11.3, which is higher than its previous year. All other things
equal:
A. Company A appears to be better managed.
B. Company A will have the lower days-to-collect measure.
C. Company B appears to be better managed.
D. Company B's days-to-collect measure is rising.

Blooms: Understand
Difficulty: Hard
8-42
106. The accounting issues for notes receivable are similar to those for accounts receivable,
with this exception:
A. Unlike accounts receivable, which are interest-free until they become overdue, notes
receivable charge interest from the day they are created to the day they are due (their maturity
date).
B. Unlike notes receivable, which are interest-free until they become overdue, accounts
receivable charge interest from the day they are created to the day they are due (their maturity
date).
C. There are no exceptions, they are similar.

Blooms: Understand
Difficulty: Medium
107. The direct write-off method:

A. ignores the matching principle.
B. is an acceptable alternative method of recognizing bad debt expense under GAAP.
C. results in higher bad debt expense for most companies.
D. may only be used by companies that do not extend credit to their customers.

Blooms: Understand
Difficulty: Easy
108. The failure to match Bad Debt Expense with Sales Revenue in the same period will lead
to the distorted views of Net Income:
A. in the period of the sale as well as in the period the bad debt is discovered.
B. in the period of sale.
C. in the period of write-off.
D. does not lead to any distortion.

Blooms: Understand
Difficulty: Medium
8-43
109. The balance in the Allowance for Bad Doubtful Accounts

A. will never equal the balance in Bad Debt Expense.
B. will equal the balance in Bad Debt Expense in the first year of use.
C. will equal the balance in Bad Debt Expense in its last year of use.
D. will always equal the balance in Bad Debt Expense.

Blooms: Understand
Difficulty: Medium
110. A non-GAAP alternative to the allowance method of accounting for uncollectible

accounts refers to the
A. direct write-off method.
B. allowance method.
C. percentage of sales method.
D. aging of accounts method.

Blooms: Understand
Difficulty: Medium
111. When a customer's balance is known to be uncollectible and a write off has occurred
A. The net effect on the income statement is zero.
B. Accounts receivable decrease and there is no impact on revenues.
C. Contra-Asset accounts decrease and there is no impact on expenses.
D. All of the choices are correct.

Blooms: Understand
Difficulty: Medium
8-44
112. The disadvantage(s) of extending credit, can be identified as

A. Increased wage cost.
B. Bad debt costs.
C. Delayed receipt of cash.

Blooms: Remember
Difficulty: Easy
113. Channel stuffing is a practice that

A. is designed to attract as many downstream clients to a particular product as possible.
B. allows customers more time to pay their accounts to entice them to buy as much as
possible.
C. permits retailers to sell way more products then they can possibly purchase.

Blooms: Remember
Difficulty: Medium
8-45
Another random document with
no related content on Scribd:
to deal. A graphic account of the battle at Elandslaagte was
written by the famous newspaper correspondent, G. W. Steevens,
who died shortly afterwards at Ladysmith. Two days after
Elandslaagte there was another engagement at Reitfontein,
still nearer to Ladysmith, fought for the purpose of keeping
the Boers from intercepting the retreat of General Yule. The
British forces defending Natal were now concentrated at
Ladysmith, which they had chosen for their main position, and
in which they had been collecting large quantities of military
stores. General Sir George White was there in general command.
The Boers, with General Joubert in chief command, were rapidly
closing in upon the town, and, on the 29th, they had a Creusot
(French) six-inch gun on a neighboring hill, within range,
ready to drop shells into its streets. That night General
White made an attempt to break their lines which ended in sore
disaster. One column, which marched far out, to a hill called
Nicholson's Nek, for a flanking attack on the enemy, lost most
of its ammunition and its battery, by a stampede of mules, and
then was caught in so helpless a position that it had to lay down
its arms. "The cursed white flag," wrote Mr. Steevens. "was up
again over a British force in South Africa. The best part of a
thousand British soldiers, with all their arms and equipment
and four mountain guns, were captured by the enemy. The Boers
had their revenge for Dundee and Elandslaagte in war; now they
took it full measure in kindness. As Atkins had tended their
wounded and succoured their prisoners there, so they tended
and succoured him here. One commandant wished to send the
wounded to Pretoria; the others, more prudent as well as more
humane, decided to send them back into Ladysmith. They gave
the whole men the water out of their own bottles; they gave
the wounded the blankets off their own saddles and slept
themselves on the naked veldt. They were short of transport,
and they were mostly armed with Martinis; yet they gave
captured mules for the hospital panniers and captured
Lee-Metfords for splints." It is consoling to come on a bit of
incident like this in the generally horrid story of war.
A few days later the communications of Ladysmith southward
were cut off, and the forces commanded by General White, about
10,000 in number, were hemmed in by superior numbers of the
Boers. British reinforcements were now beginning to arrive in
South Africa, and great numbers were at sea, not only imperial
troops, coming from England, India, Ceylon and elsewhere, but
colonial troops, offered by Canada, New Zealand and the
Australian colonies, and accepted by the imperial government.
The first operations of the British campaign were planned with
three objects, more or less distinct, namely, to rescue
General White's army, at Ladysmith, to relieve Kimberley, and
to expel the Boers from northern Cape Colony. They were
conducted on three lines, from the Natal port of Durban,
towards Ladysmith, under General Clery at the beginning; from
Cape Town towards Kimberley, under General Lord Methuen; from
Port Elizabeth and East London to Queenstown and the Cape
districts occupied by the Boers, under General Gatacre.
In the early battles of General Methuen's campaign, fought at

Belmont, November 23d, at Enslin, or Graspan, on the 25th, and
at Modder River, only 25 miles from Kimberley, on the 28th, he
carried his point, and kept up his advance, but at a heavy
sacrifice of men. The battle with Cronje's forces at Modder
River was a desperate struggle of ten hours duration, in which
the British lost nearly 500 men and gained little. The Boers
withdrew to an equally strong position, behind fortified lines
which extended, some six miles in length, on hills between two
points which bore the names of Spytfontein and Majesfontein.
There General Methuen attacked them again, December 11, and
met with a terrible repulse. His Highland Brigade, advancing
in the darkness, before daybreak, was in the midst of the
enemy's intrenchments before it knew them to be near, and was
horribly cut to pieces, losing 53 officers, including its
commander, General Wauchope, and 650 men. The British fell
back to Modder River, leaving not less than 1,000 men behind.
Just one day before this catastrophe, on the 10th, another of
like nature, but little less serious, was sustained by General
Gatacre's column, moving from Queenstown. He, too, attempted a
night march and an early morning attack on the Boers in a
fortified position at Stormberg, was misled by guides,
miscalculated the distance, neglected to send scouts ahead,
and so took his men to the very muzzles of waiting guns. From
the storm which then opened on them there were more than 500
who did not escape. Besides the dead and wounded, many went as
prisoners to Pretoria. Before the week of these defeats
reached its end, another, far worse, had been added in the
Natal campaign. General Sir Redvers Buller, appointed to the
chief command in South Africa, had arrived at Cape Town on the
last day of October, and, after some general study of the
field at large, had taken personal direction of the operations
in Natal, for the relief of Ladysmith. His movements were
undoubtedly hurried by urgent appeals from General White. On
the 15th of December he felt prepared to attempt the passage
of the Tugela River, near Colenso, and did so with his full
force, at two drifts, or fords, some two miles apart. Like
Methuen and Gatacre, he seems to have been strangely
misinformed as to the location and strength of the
intrenchments of the Boers. The latter had succeeded again and
again in concealing lines of deadly rifle-pits and batteries
until their assailants fairly stumbled against them, within
fatally close range. This happened at Colenso, as at Stormberg
and Majesfontein and the ill-managed attempt to begin an
advance upon Ladysmith cost 165 men and officers killed, 670
wounded, 337 prisoners and missing, besides 11 guns.
SOUTH AFRICA: The Field of War: A. D. 1900.

Fighting qualities of the Boers.
"Take a community of Dutchmen of the type of those who

defended themselves for fifty years against all the power of
Spain at a time when Spain was the greatest power in the
world. Intermix with them a strain of those inflexible French
Huguenots who gave up home and fortune and left their country
forever at the time of the revocation of the Edict of Nantes.
The product must obviously be one of the most rugged, virile,
unconquerable races ever seen upon earth.
{496}
Take this formidable people and train them for seven
generations in constant warfare against savage men and
ferocious beasts, in circumstances under which no weakling
could survive, place them so that they acquire exceptional
skill with weapons and in horsemanship, give them a country
which is eminently suited to the tactics of the huntsman, the
marksman, and the rider. Then, finally, put a finer temper
upon their military qualities by a dour fatalistic Old
Testament religion and an ardent and consuming patriotism.
Combine all these qualities and all these impulses in one
individual, and you have the modern Boer—the most formidable
antagonist who ever crossed the path of Imperial Britain."
A. C. Doyle,
The Great Boer War,
chapter 1.
Count Adalbert von Sternberg, a German officer who served with

the Boers, and who has since related his experiences in a
book, writes to the same effect. "The Boers," he remarks,
"were mounted, whilst the English were on foot, a matter of
considerable importance in these hot countries. Given the same
or even slightly superior forces, no Continental army would
have played its part better than the English, and I even doubt
whether, in regard to practical equipment and technical smartness
and efficiency the Continent would have done as well. The fact
is the Boer is an enemy of quite exceptional a character, such
as never has been met before, or is likely to be met again.
Mounted sharpshooters, armed with the very best of weapons,
acclimatized, fanatical, and accustomed to habits of war, are
terrible opponents, and cannot be dealt with off hand as if
they were hordes of savages. One must not forget that the
Boers have the keenest eyes imaginable, and that they
understand better than anyone else how to get the fullest
advantage of cover. All these are advantages which go far
towards compensating defective leading and the weakening of
moral due to being always on the defensive. … The Boers would
have had much greater successes if they had not abandoned all
idea of taking the offensive. They could not be brought to
that, for that they lacked courage, and to that lack of
courage they owe their destruction."
SOUTH AFRICA: The Field of War: A. D. 1900 (January-February).

Continued British disasters on the Tugela.
Lord Roberts and Lord Kitchener in the field.
Invasion of Orange Free State.
Capture of General Cronje and army.
Relief of Kimberley and Ladysmith.
The dark and heavy clouds of disaster which overhung the

British in South Africa at the close of the year shadowed
England with anxiety and gloom. For the first time, the
seriousness of the task of war in which the country had become
engaged was understood, and energies corresponding to it were
roused. Field-Marshal Lord Roberts, of Indian and Afghan
renown, was sent out to take supreme command, with the equally
famous Lord Kitchener, subjugator of the Egyptian Sudan, for
his chief of staff. Immense reinforcements of troops were
provided for with haste. On the 1st of January it was
estimated that 30,000 fresh troops were afloat or on the point
of embarkation, and that Lord Roberts would have 200,000 men
at command when all then assigned to South Africa should have
reached Natal and the Cape. Lord Roberts landed at the Cape on
the 10th of January, and was occupied for a month in
organizing and preparing for new movements in the field.
Meantime, General Buller had made a second attempt to turn the
strongly fortified position of his opponent on the Tugela,
between his own army and the beleaguered force at Ladysmith,
and had failed more discouragingly than before. Crossing the
Tugela, some miles west of Colenso, on the 17th, he pressed a
hard-fought, uphill advance, from one to another of the rocky
hills (called kopjes) of the region, for several days. On the
23d his troops stormed the fortifications of the Boers on
Spion Kop, a spur of the Drakenberg mountains, and carried
them with heavy loss, only to find that they were commanded
from other heights and could not be held. Again he drew back
to the southern bank of the Tugela, on the 29th; but only for
a few days. On the 5th of February his army was once more
pushed beyond the river, and entrenched in a position among
the hills, which it held until the 9th, and was then, for the
third time, withdrawn. This third movement is supposed to
have been a feint, intended to detain the Boer forces in his
front, either from some assault feared at Ladysmith or from
interference with the campaign which Lord Roberts was about to
open. The besieged at Ladysmith were holding out with grim
resolution, but they were known to be in sore straits.
Occasional messages by the heliograph told of much sickness
and fast approaching starvation in the town. Fever was killing
more than the shells from the bombarding guns; and the chances
of relief seemed to have almost disappeared.
But a sudden change in the whole military situation was about

to be made. Lord Roberts and Lord Kitchener had organized
arrangements of transportation and supplies for handling the
immense force now at their command, and were ready to execute
their plans. The former arrived at Modder River on the 9th of
February; two days later his columns were set in motion, and
the Boer forces, under General Cronje, were too greatly
outnumbered to withstand the avalanche which fell upon them.
General French led a cavalry expedition to Kimberley, reaching
the town on the 15th and raising the siege. The next day
General Cronje was in retreat towards Bloemfontein, the Free
State capital, harassed by British cavalry, and with the main
army of Lord Roberts straining every nerve to strike him
before he reached it. On the 18th he was brought to bay, at a
point on the Madder River, near Paardeberg, where he defended
himself for nine days, in a situation that was impregnable to
assault, but terribly exposed to artillery fire from
surrounding heights. He was expecting help from the forces in
Natal and elsewhere, and several attempts were made by his
associates to reach him; but the British were too strong to be
driven from their prey. After suffering to such a degree that
his men would endure no more, the brave and stubborn Boer
surrendered on the 27th, his army, reduced to about 4,000,
laying down their arms. Some 500 had been taken in the
previous fighting, and considerable numbers in the last days
of the siege, are said to have deserted and found means to
slip through the enemy's lines. The prisoners were sent, for
convenience of custody, to the island of St. Helena, the
general being accompanied by his whole family, and treated
with much respect.
{497}
While these operations were being carried to success by Lord

Roberts, General Buller was again attacking the formidable
fortifications of the enemy in his front. From the 14th of
February until the 23d he sacrificed great numbers of men in
assaults which failed to break a passage through the kopjes
defended by Boer guns. But Lord Roberts's invasion of the Free
State had, by this time, caused large withdrawals of Boers
from the line of the Tugela, and they were preparing to raise
the siege of Ladysmith. Consequently, when the British attack
was renewed, on the 27th, it achieved success, at last. The
Boers were driven from their main position and abandoned their
whole line. Ladysmith was reached by a swift advance of
cavalry the next day, and the half-starved garrison and
citizens were soon receiving supplies.
SOUTH AFRICA: The Field of War: A. D. 1900 (March).

Overtures of peace from Presidents Kruger and Steyn.
The reply of Lord Salisbury.
Death of General Joubert.
On the 5th of March, the Presidents of the South African

Republic and the Orange Free State addressed the following
telegram, jointly, to Lord Salisbury: "The blood and tears of
the thousands who have suffered by this war, and the prospect
of all the moral and economic ruin with which South Africa is
now threatened, make it necessary for both belligerents to ask
themselves dispassionately, and as in the sight of the Triune
God, for what they are fighting, and whether the aim of each
justifies all this devouring misery and devastation. With this
object, and in view of the assertions of various members of
the British Parliament to the effect that this war was begun
and is being carried on with the set purpose of undermining
Her Majesty's authority in South Africa, and of setting up an
Administration over all South Africa independent of Her
Majesty's Government, we consider it our duty solemnly to
declare that this war was undertaken solely as a defensive
measure for securing the threatened independence of the South
African Republic, and is only continued in order to secure the
incontestable independence of both Republics as sovereign
international States, and to ensure that those of Her
Majesty's subjects who have taken part with us in this war
shall suffer no harm whatever in person or property. On these
conditions, but on these conditions alone, are we now, as in
the past, desirous of seeing peace reëstablished in South
Africa, and of putting an end to the evil now reigning over
South Africa; while, if Her Majesty's Government is determined
to destroy the independence of the Republics, there is nothing
left to us and our people but to persevere to the end in the
course already begun, in spite of the overwhelming
pre-eminence of the British Empire, confident that the God who
lighted the unextinguishable fire of the love of freedom in
the hearts of our fathers will not forsake us, but will
accomplish His work in us and in our descendants. We hesitated
to make this declaration earlier to Your Excellency, as we
feared that as long as the advantage was always on our side,
and as long as our forces held defensive positions far in Her
Majesty's Colonies, such a declaration might hurt the feelings
of honour of the British people; but now that the prestige of the
British Empire may be considered to be assured by the capture
of one of our forces by Her Majesty's troops, and that we are
thereby forced to evacuate other positions which our forces
had occupied, that difficulty is over, and we no longer
hesitate clearly to inform your Government and people in the
sight of the whole civilised world why we are fighting, and on
what conditions we are ready to restore peace."
On the 11th Lord Salisbury replied as follows: "I have the

honour to acknowledge Your Honours' telegram, dated the 5th of
March, from Bloemfontein, of which the purport is principally
to demand that Her Majesty's Government shall recognise the
'incontestable independence' of the South African Republic and
Orange Free State 'as sovereign international States,' and to
offer, on those terms, to bring the war to a conclusion. In
the beginning of October last peace existed between Her
Majesty and the two Republics under the Conventions which then
were in existence. A discussion had been proceeding for some
months between Her Majesty's Government and the South African
Republic, of which the object was to obtain redress for
certain very serious grievances under which British residents
in the South African Republic were suffering. In the course of
those negotiations, the South African Republic had, to the
knowledge of Her Majesty's Government, made considerable
armaments, and the latter had, consequently, taken steps to
provide corresponding reinforcements to the British garrisons
of Cape Town and Natal. No infringement of the rights
guaranteed by the Conventions had, up to that point, taken
place on the British side. Suddenly, at two days' notice, the
South African Republic, after issuing an insulting ultimatum,
declared war upon Her Majesty; and the Orange Free State, with
whom there had not even been any discussion, took a similar
step. Her Majesty's dominions were immediately invaded by the
two Republics, siege was laid to three towns within the
British frontier, a large portion of the two Colonies was
overrun, with great destruction to property and life, and the
Republics claimed to treat the inhabitants of extensive
portions of Her Majesty's dominions as if those dominions had
been annexed to one or other of them. In anticipation of these
operations the South African Republic had been accumulating
for many years past military stores on an enormous scale,
which by their character could only have been intended for use
against Great Britain. Your Honours make some observations of a
negative character upon the object with which these
preparations were made. I do not think it necessary to discuss
the questions you have raised. But the result of these
preparations, carried on with great secrecy, has been that the
British Empire has been compelled to confront an invasion
which has entailed upon the Empire a costly war and the loss
of thousands of precious lives. This great calamity has been
the penalty which Great Britain has suffered for having in
recent years acquiesced in the existence of the two Republics.
In view of the use to which the two Republics have put the
position which was given to them, and the calamities which
their unprovoked attack has inflicted upon Her Majesty's
dominions, Her Majesty's Government can only answer Your
Honours' telegram by saying that they are not prepared to
assent to the independence either of the South African
Republic or of the Orange Free State."
Great Britain, Papers by Command:

Africa, Number 2, 1900.
{498}
On the 27th of March, the Boer cause experienced a great loss,

in the sudden death, from peritonitis, of General Joubert, the
Commandant-General and Vice President of the South African
Republic.
SOUTH AFRICA: Orange Free State: A. D. 1900 (March).

Proclamation to the burghers by the British commander.
Soon after entering the Orange Free State, Lord Roberts issued
a proclamation addressed to the burghers, assuring them that
the British government did not believe them to be responsible
for the aggressive act of war committed by the government of
the Orange Free State, and bore them no ill-will. "I,
therefore," his proclamation continued, "warn all Burghers to
desist from any further hostility towards Her Majesty's
Government and the troops under my command, and I undertake
that any of them, who may so desist and who are found staying
in their homes and quietly pursuing their ordinary
occupations, will not be made to suffer in their persons or
property on account of their having taken up arms in obedience
to the order of their Government. Those, however, who oppose
the forces under my command, or furnish the enemy with
supplies or information, will be dealt with according to the
customs of war. Requisitions for food, forage, fuel, or
shelter, made on the authority of the officers in command of
Her Majesty's troops, must be at once complied with; but
everything will be paid for on the spot, prices being
regulated by the local market rates. If the inhabitants of any
district refuse to comply with the demands made on them, the
supplies will be taken by force, a full receipt being given.
Should any inhabitant of the country consider that he or any
member of his household has been unjustly treated by any
officer, soldier or civilian attached to the British Army, he
should submit his complaint, either personally or in writing,
to my Headquarters or to the Headquarters of the nearest
General Officer. Should the complaint on enquiry be
substantiated, redress will be given. Orders have been issued
by me, prohibiting soldiers from entering private houses, or
molesting the civil population on any pretext whatever, and
every precaution has been taken against injury to property on
the part of any person belonging to, or connected with, the
Army."
After the occupation of Bloemfontein, Lord Roberts issued a

second proclamation, announcing that he had received authority
from his government to offer the following terms to those "who
have been engaged in the present war": "All Burghers who have
not taken a prominent part in the policy which has led to the
war between Her Majesty and the Orange Free State, or
commanded any forces of the Republic, or commandeered or used
violence to any British subjects, and who are willing to lay
down their arms at once, and to bind themselves by an oath to
abstain from further participation in the war, will be given
passes to allow them to return to their homes and will not be
made prisoners of war, nor will their property be taken from
them."

Cd. 261, 1900, pages 62-63.
SOUTH AFRICA: The Transvaal and the Free State:

A. D. 1900 (March).
Boer Peace Commissioners to Europe and America.
In March, three commissioners, Messrs. Fischer, Wolmeraans and

Wessels were sent to Europe and America by the two Boer
governments to solicit intervention in their behalf. They
visited several European countries and proceeded thence to the
United States, in May. There were many demonstrations of
popular sympathy in their reception, on both sides of the
ocean, but they failed to obtain official recognition.
SOUTH AFRICA: The Field of War: A. D. 1900 (March-May).

The British in Bloemfontein and Kroonstad.
The relief of Mafeking.
From the scene of the surrender of General Cronje Lord Roberts

moved quickly on the Free State capital. His advance was
resisted by considerable forces of the Boers, but he was able
to turn most of their positions, and fought only one severe
battle, at Driefontein, on the 10th of March. On the 12th his
cavalry was in possession of Bloemfontein, and the
Field-Marshal entered the city on the following day, receiving
from the municipal officers a formal surrender of the keys of the
public buildings, and being welcomed by some part of the
population with demonstrations of joy. President Steyn and
most of the members of the government of the Republic had
retired to Kroonstad and established the seat of authority
there. The lighting and the forced marches of a single month,
since he began his advance, had now exhausted the mobility of
Lord Roberts's army, worn out the means of transportation
which Lord Kitchener had hastily organized for it,—while his
troops were being stricken with fever,—and he was compelled to
suspend his campaign for some weeks. The situation at that
time was probably described with accuracy by a military
contributor to "Blackwood's Magazine" for June, 1900, who
wrote: "Lord Roberts found himself at Bloemfontein with the
wreck of an army and a single narrow-gauge line of railway
between himself and his base, upwards of 700 miles distant. It
was very soon known in Boer headquarters at Kroonstad that he
could not move beyond Bloemfontein for some weeks. The
triumphal march of Generals Gatacre and Clements through the
recently captured territory, accepting submissions, hoisting
union-jacks and picking up rifles of antique date, afforded
much amusement to the Boers, who saw their opportunity and
streamed down in large numbers on the small British posts
which were scattered east and south of the railway."
There was a good deal of raiding and fighting on a minor

scale, with a number of mortifying mishaps to the British
arms; but little of importance occurred in the military field
until near the end of April, when Lord Roberts had reinforced
and mobilized his army sufficiently to move forward again,
towards Pretoria. On the 12th of May he entered Kroonstad, and
the Free State government was again in flight. He paused at
Kroonstad for some days, and while he paused there came news
of the relief of Mafeking, which caused a wilder joy in
England than any other event of the war. There had been
painful anxiety on account of the besieged in that remote
town, in the far corner of Bechuanaland, on the border of the
Transvaal,—so far from help, and so stoutly defended for seven
weary months by a very small force. From a point near
Kimberley, a flying column of mounted men, mostly colonial
troops, commanded by Colonel Mahon, had been started northward
on the 4th of May, taking a route east of the railway, to avoid,
as much as possible, the Boers.
{499}
On the 15th they were 20 miles west of Mafeking, and there
they were joined by another detachment, under Colonel Plumer,
which had been operating in the northern region for some weeks
without being able to break up the siege. The two advanced on
the works of the besiegers, drove them out by hard fighting,
and entered the town on the 18th of May. Meantime, another
column, under General Hunter, had been securing and opening
the railway, to bring up the sorely needed supplies for the
famished and worn-out garrison and people of the town. The
defense of Mafeking was one of the finest performances of the
war, and gave distinction to Colonel Baden-Powell.
SOUTH AFRICA: Cape Colony: A. D. 1900 (April-June).

The question of the treatment of Cape Colonists who had taken
part with the Boers in the war.
Resignation of Premier Schreiner.
On the 28th of April, the Ministers of Cape Colony addressed

to the Governor, Sir Alfred Milner, a Minute upon the subject
of the treatment of those inhabitants of the Colony who had
joined or given aid to the Boers in the war, and who had thus
made themselves liable to the pains and penalties of high
treason. "Ministers submit," they said, "that the ends of
justice would be served by the selection of a certain limited
number of the principal offenders, whose trials would mark the
magnitude of their offence, and whose punishment, if found
guilty, would act as a deterrent. For the remainder, Ministers
believe that the interests both of sound policy and of public
morality would be served if Her Gracious Majesty were moved to
issue, as an act of grace, a Proclamation of amnesty under
which, upon giving proper security for their good behaviour,
all persons chargeable with high treason, except those held
for trial, might be enlarged and allowed to return to their
avocations. Ministers urge such a course not only on the
ground of that natural desire for clemency towards her erring
subjects which they feel sure would spring from Her Gracious
Majesty, but from a deep sense of the importance of such a
step upon the future well-being of this country."
The substance of the Minute was transmitted by cable to Mr.

Chamberlain, and he replied to it on the 5th of May, objecting
to the proposed proclamation of a broad amnesty, saying:
"Clemency to rebels is a policy which has the hearty sympathy
of Her Majesty's Government, but justice to loyalists is an
obligation of duty and honour. The question is how can these
two policies be harmonized. It is clear that in the interest
of future peace it is necessary to show that rebellion cannot
be indulged in with impunity, and above all that if
unsuccessful it is not a profitable business for the rebel.
Otherwise the State would be offering a premium to rebellion.
The present moment, therefore, while the war is still
proceeding, and while efforts may still be made to tempt
British subjects into rebellious courses, is in any case not
appropriate for announcing that such action may be indulged in
with absolute impunity. And if, as has been suggested, a great
many of the Queen's rebellious subjects are the mere tools of
those who have deceived them, it is important that these
should be made aware individually that whatever their leaders
may tell them rebellion is a punishable offence." This
attitude of the Imperial Government on the subject of amnesty
occasioned differences in the Ministry of Cape Colony which
led to the resignation of the Premier, Mr. W. P. Schreiner, on
the 13th of June, and the appointment of a new Ministry, under
Sir Gordon Sprigg.

July, 1900, Cape Colony, Cd. 264.
SOUTH AFRICA: The Field of War: A. D. 1900 (May).
The British army stricken with fever.
The losses of the British army in battle during this campaign

of Lord Roberts had not been severe; but it had encountered a
worse enemy than the Boers, and was being terribly thinned and
shattered by the ravages of enteric or typhoid fever. The
sanitary condition of the army in May, and the lack of due
provision for dealing with the dreadful epidemic, have been
graphically described by the writer already quoted, in
"Blackwood's Magazine." Referring to the outset of the
campaign, in February, he wrote:
"The movement of men and cattle depends on flesh and muscle—it

cannot go on for ever; the strain of incessant marching on
insufficient food and forage will find out the weak spot even
in the most willing. General French started on his memorable
ride with 4,800 horses, of which 990 dropped by the way,
though the loss in the ranks, exclusive of Paardeberg, was
only fifty men,—the brunt of the battle for life lay with the
horses. But not for long. The men with worn-out boots,
tattered clothes, hurrying through scorching days and frosty
nights, with half a biscuit and water tainted with dead Boers,
to satisfy an appetite and thirst compelled by hard work at an
altitude of 4,000 feet, who marched in as soldiers, proud of the
victory they had won, staggered and fell out, victims to the
curse that creeps in, unnoticed, wherever camps are
crowded—enteric. … Of all things on which we prided ourselves
was the care and the money we had lavished to provide comforts
for our sick soldiers. The foremost surgeons of the day had
volunteered; military hospitals had been arranged on the
latest plan; private benevolence had provided as many more;
ladies of every rank in life had gone out to nurse: the
soldiers, at all events, would be looked after. Letters from
the front had come from patients to say how well they had been
treated. Mr. Treves at the Reform Club made a speech eulogizing
the perfection of the hospitals in Natal, and Sir W. MacCormac
spoke of the medical arrangements as admirable—our minds
rested content. All this was so long ago as the 10th March,
but what happened in March, for all we knew, was happening in
May. Then Mr. Burdett-Coutts told us that hundreds of men were
lying in the worst stages of typhoid, with only a blanket to
cover them, a thin water-proof sheet (not even that for many)
between them and the ground; no milk and hardly any medicines;
without beds, stretchers, or mattresses; without pillows, without
linen of any kind, without a single nurse amongst them, with a
few private soldiers as orderlies, and only three doctors to
attend on 350 patients; their faces covered with flies in
black clusters, the men too weak to brush them off, trying in
vain to dislodge them by painful twitching of the
features—there was no one to do it for them. And this a mile
from Bloemfontein, where the army had been for six weeks. It
is true that a terrible epidemic had followed it from
Paardeberg, to break out when it halted. Lord Roberts tells us
that before he left on May 3rd the sick gradually increased to
2,000, reaching on June 4th the appalling number, in
Bloemfontein, of over 5,000 suffering from typhoid alone.
{500}
Such were the bare facts as stated on either side—a sudden and
devastating epidemic with totally inadequate hospital
arrangements to meet it. … Yet typhoid has always been the
scourge of armies in the field,—in South Africa the
water-supply, invariably surface drainage fouled by dead
animals, is proverbial—that at least was known. The medical
authorities on the spot were repeatedly warned by local
medical men that from February onwards ten men would be down
with typhoid for one with wounds. Ladysmith is in evidence of
the persistent presence of typhoid—every one who has visited
South Africa bears witness to the same—it can hardly be urged
that an outbreak was unreasonable to expect; yet when it did
occur it seems to have been taken by the medical
administration at the base as an unwarrantable intrusion."
The War Operations in South Africa
(Blackwood's Magazine, August, 1900).
SOUTH AFRICA: The Transvaal: A. D. 1900 (May).

Speech of President Kruger to the Volksraads.
The following translation of a speech addressed to both

Volksraads by President Kruger, in May, 1900, was published in
England some months later: "It is known to you," said the
President, "how, before the war started, pressure was brought
to bear to obtain the franchise. It is known to you that the
Government conceded, after the Rand had consented, although
this body saw the difficulty in the matter, till even the
burghers made petitions to the effect that we had parted with
all our rights. The Government had in view the prevention of
shedding blood. The Raad then consented to a seven years'
franchise, and also to grant immediately the franchise to
people resident here longer than seven years. There were then
nearly 30,000 who would obtain the franchise immediately, and
so much was conceded that when these had obtained the
franchise they would have been able to out-vote the old
burghers. We consented to this solely to prevent the shedding
of blood. Yet they were not satisfied and they wanted the
franchise after five years' residence. Our burghers were
against this, and there were also members of the Raad who
would not agree to this, yet, nevertheless, the Government
made a proposition about it, because they had discovered that
it was not about the franchise, but that it was a pretence
full of Pharisaic hypocrisy, because documents had been found
that in 1896 it was decided that the two independent Republics
should not be allowed to exist any more. I cannot express
myself otherwise than to call it a devilish fraud. Peace was
spoken of while a resolution had already been passed to
annihilate us. Even if we had conceded more, yea, even if we
had said that the franchise could be obtained after one year,
then that would not have been accepted. It was proved by
documents that, as this nation could not be allowed to be a
free nation, as was pointed out in the address, the
Government, to prevent the further shedding of blood, made a
proposition to Chamberlain and Salisbury about this matter,
and what was the reply? You have, doubtless, read the paper,
and, although I cannot verbally repeat the contents of the
said document, it amounts to this. That they were annoyed ever
to have acknowledged us as an independent nation, and that,
notwithstanding all conventions made, they would never
acknowledge this nation as self-supporting. Honourable
gentlemen, I had to express that which was in my mind. Psalm
83 speaks of the assault of the evil one on the Kingdom of
Christ. That must not exist. The self-same words of Salisbury
also appear, because he says 'this nation must not exist,' and
God says, 'this nation shall exist.' Who will be victorious?
Certainly the Lord. You see therein the deceit which they then
already practised, even they, for though our nation did not
wish to part with any rights, the Executive Council conceded
so far that we nearly lost the country. The intention was not
to obtain these rights. They wanted our country not to be
independent any longer. Every other proposition was
unsatisfactory to them.
"Let us look this matter in the face and see the cunning
deceit enveloped therein. They wrote to the Orange Free State
that they had nothing against them, but that they had some
grievance against this Republic. Their intention was to tear
the two Republics asunder, and it has been proved by
documentary evidence that neither of them would be allowed to
remain. You see the deception which lies therein. The
documents prove that this was already decided in 1896, from
the time of Jameson's invasion, and yet they maintain that if
the Orange Free State had laid down their weapons that that
country would remain in existence. The Orange Free State
decided not to lay down their arms, and we started together.
We were 40,000 men, but everywhere we had to watch the
Kaffirs, and even the commander of Mafeking informed us that
certain Kaffir chiefs would assist him. We know that these
numbered 30,000 able-bodied men. The number of Kaffirs nearly
equalled the number of our forces. Besides them, more than
200,000 English troops arrived, and against these we have to
fight. Now, gentlemen, look on God's government. Is it not
wonderful that 40,000 men having to fight these thousands,
besides the coloured people, still live? Acknowledge therein
the hand of God. The matter I wish to impress is this. It is
remarkable that when we meet the enemy we stand in the
proportion of 10 to 100. Yet the Lord hath spared us thus far.
I do not wish to prophesy, but I wish to point out that our
guidance is in the word of God. It is extraordinary, but this
war is a sign of the times. What it amounts to is this. That
the power of the Beast is an obstinate power to persecute the
Church and will continue this until the Lord says, 'Thus far
and no further: and why? Because the Church must be tried and
purified as there is so much iniquity among us. That is why
the war is extraordinary and is a sign of the times. Every one
will be convinced that the word of God can be plainly traced
in this matter. They say that the people 'shall not exist,'
but God says, 'it shall exist and be purified.' In my mind it
lies clear and discernable that the day of grace is not far
off. The Lord will prove to be ruler, and nothing shall take
place without His will. When He allows chastisement to come
upon us we must bend ourselves and humble ourselves, confess
our sins and turn again to the Lord. When the whole nation has
been humbled, and it is seen that we can do nothing ourselves,
the Lord will help us and we shall have peace immediately.
{501}
This humility has not grasped our hearts sufficiently at
present, and we must perform our earnest duty as Peter says in
1 Peter, chapter v., v. 7 and 8:—'Casting all your care upon
Him; for He careth for you'; but in the eighth verse it
states:—'Be sober, be vigilant; because your adversary the
Devil, as a roaring lion, walketh about, seeking whom he may
devour.' That is the point on which we must be careful. If we
fall into disbelief then we lower ourselves.

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True / False Questions

1. In a competitive market it is necessary to extend credit to at least some customers in order

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3. Trade accounts receivable are created by selling goods or services on credit.

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4. Write-off method affects income statement as an additional expense is incurred when an

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7. The allowance for doubtful accounts is a contra-asset account.

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24. Direct write-off method violates the matching principle.

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25. Allowance for Doubtful Accounts is a contra-asset account.

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26. Allowance for Doubtful Accounts is a temporary account.

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27. Bad Debt Expense is a temporary account.

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29. A subsidiary account refers to an account that is to be written off.

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Multiple Choice Questions

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From the Balance Sheet 2018 2017

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43. An Allowance for Doubtful Accounts is a contra-account paired with:

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