Question 1

You have just received notice that a customer with an Accounts Receivable balance of $500 has gone bankrupt and will not make any future payments.Assuming you use the allowance method for uncollectible accounts, the entry you make is to

Accepted Answer

A)  debit Allowance for Doubtful Accounts and credit Bad Debts Expense.
B)  debit Allowance for Doubtful Accounts and credit Accounts Receivable.
C)  debit Bad Debts Expense and credit Allowance for Doubtful Accounts.
D)  debit Bad Debts Expense and credit Accounts Receivable.

Question 2

Under the allowance method for uncollectible accounts, Bad Debts Expense is recorded

Accepted Answer

A)  in the year after the credit sale is made.
B)  in the same year as the credit sale.
C)  as each credit sale is made.
D)  when an account is written off as uncollectible.

Question 3

The balance of the Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debts Expense

Accepted Answer

A)  is relevant when using the percentage of receivables basis.
B)  is relevant when debit card sales are made.
C)  is relevant when notes receivable are used.
D)  will never show a debit balance at this stage in the accounting cycle.

Question 4

It is possible for the allowance account to have a debit balance before the year end adjusting entry is recorded.

Accepted Answer

A) True 
 B)False

Question 5

The two key parties to a promissory note are the

Accepted Answer

A)  maker and a bank.
B)  debtor and the payee.
C)  maker and the payee.
D)  sender and the receiver.

Question 6

When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when

Accepted Answer

A)  a sale is made.
B)  an account becomes uncollectible and is written off.
C)  management estimates the amount of uncollectible accounts.
D)  a customer's account becomes past due.

Question 7

An aging of a company's accounts receivable indicates that $13,000 is estimated to be uncollectible.If the Allowance for Doubtful Accounts has a $2,400 debit balance, the adjustment to record bad debts for the period will require a

Accepted Answer

A)  debit to Bad Debts Expense for $15,400.
B)  debit to Bad Debts Expense for $13,000.
C)  debit to Bad Debts Expense for $10,600.
D)  debit to Allowance for Doubtful Accounts for $13,000.

Question 8

Allowance for Doubtful Accounts on the statement of financial position

Accepted Answer

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

Question 9

Writing off an uncollectible account involves

Accepted Answer

A)  a debit to Bad Debts Expense.
B)  a debit to Allowance for Doubtful accounts.
C)  a debit to Sales Returns and Allowances.
D)  a debit to Accounts Receivable.

Question 10

Under the allowance method for uncollectible accounts

Accepted Answer

A)  the net realizable value of accounts receivable is greater before an account is written off than after it is written off.
B)  Bad Debts Expense is debited when a specific account is written off as uncollectible.
C)  the net realizable value of accounts receivable in the statement of financial position is the same before and after an account is written off.
D)  Allowance for Doubtful Accounts is closed each year to Income Summary.

Question 11

Accounts receivable can be the result of either cash or credit sales.

Accepted Answer

A) True 
 B)False

Question 12

Under the aging of a company's accounts receivable, the uncollectible accounts are estimated to be $26,000.If the unadjusted balance for the Allowance for Doubtful Accounts is $9,000 debit, what is the amount of bad debts expense for the year?

Accepted Answer

A)  $17,000
B)  $18,000
C)  $26,000
D)  $35,000

Question 13

Account for bad debts.

Accepted Answer

The allowance method, using a percentage...

Question 14

The Allowance for Doubtful Accounts is shown under

Accepted Answer

A)  Expenses on the income statement.
B)  Revenue on the income statement.
C)  Current Liabilities on the statement of financial position.
D)  Current Assets on the statement of financial position.

Question 15

The total interest on a $6,000, 4%, 2-month note receivable is

Accepted Answer

A)  $ 20.
B)  $ 40.
C)  $ 240.
D)  $6,040.

Question 16

Under the allowance method for uncollectible accounts, the recovery of an account receivable previously written off results in a credit to the Bad Debt Expense account.

Accepted Answer

A) True 
 B)False

Question 17

When an account is written off using the allowance method for uncollectible accounts, accounts receivable

Accepted Answer

A)  is unchanged and the allowance account increases.
B)  increases and the allowance account increases.
C)  decreases and the allowance account decreases.
D)  decreases and the allowance account increases.

Question 18

Notes or accounts receivables that result from sales transactions are often called

Accepted Answer

A)  sales receivables.
B)  non-trade receivables.
C)  trade receivables.
D)  merchandise receivables.

Question 19

The collection of an account that had been previously written off under the allowance method for uncollectible accounts

Accepted Answer

A)  will increase profit in the period it is collected.
B)  will decrease profit in the period it is collected.
C)  requires a correcting entry for the period in which the account was written off.
D)  does not affect profit in the period it is collected.

Question 20

The collection of an account that had been previously written off under the allowance method for uncollectible accounts

Accepted Answer

A)  increases profit in the period of collection.
B)  involves a credit to Bad Debts Expense.
C)  will usually require two journal entries.
D)  is recorded by debiting Cash and crediting Bad Debts Expense.

Exam 8: Reporting and Analyzing Receivables

Under the allowance method for uncollectible accounts, the recovery of an account receivable previously written off results in a credit to the Bad Debt Expense account.

Correct AnswerverifiedShow Answer

The collection of an account that had been previously written off under the allowance method for uncollectible accounts

Correct AnswerverifiedShow Answer

You have just received notice that a customer with an Accounts Receivable balance of $500 has gone bankrupt and will not make any future payments.Assuming you use the allowance method for uncollectible accounts, the entry you make is to

Correct AnswerverifiedShow Answer

Under the allowance method for uncollectible accounts

Correct AnswerverifiedShow Answer

Allowance for Doubtful Accounts on the statement of financial position

Correct AnswerverifiedShow Answer

The collection of an account that had been previously written off under the allowance method for uncollectible accounts

Correct AnswerverifiedShow Answer

When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when

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Writing off an uncollectible account involves

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The two key parties to a promissory note are the

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When an account is written off using the allowance method for uncollectible accounts, accounts receivable

Correct AnswerverifiedShow Answer

Under the allowance method for uncollectible accounts, Bad Debts Expense is recorded

Correct AnswerverifiedShow Answer

Notes or accounts receivables that result from sales transactions are often called

Correct AnswerverifiedShow Answer

An aging of a company's accounts receivable indicates that $13,000 is estimated to be uncollectible.If the Allowance for Doubtful Accounts has a $2,400 debit balance, the adjustment to record bad debts for the period will require a

Correct AnswerverifiedShow Answer

The Allowance for Doubtful Accounts is shown under

Correct AnswerverifiedShow Answer

The balance of the Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debts Expense

Correct AnswerverifiedShow Answer

The total interest on a $6,000, 4%, 2-month note receivable is

Correct AnswerverifiedShow Answer

Account for bad debts.

Correct AnswerverifiedThe allowance method, using a percentage...View AnswerShow Answer

Accounts receivable can be the result of either cash or credit sales.

Correct AnswerverifiedShow Answer

Under the aging of a company's accounts receivable, the uncollectible accounts are estimated to be $26,000.If the unadjusted balance for the Allowance for Doubtful Accounts is $9,000 debit, what is the amount of bad debts expense for the year?

Correct AnswerverifiedShow Answer

It is possible for the allowance account to have a debit balance before the year end adjusting entry is recorded.

Correct AnswerverifiedShow Answer

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The allowance method, using a percentage...
View Answer

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