TEST BANK OF ACCOUNTING 26TH EDITION BY WARREN
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1.
SALESNotes
Receivable and Accounts Receivable can also be called trade receivables.
a. True
b. False
2.
Receivables
not currently
collectible are reported in the investments section of the balance sheet.
a. True
b. False
3. Trade receivables occur when two
companies trade or exchange notes receivables.
a. True
b. False
4. Other receivables include
nontrade receivables such as loans to company officers.
a. True
b. False
5.
Both
Accounts Receivable and Notes Receivable represent claims that are expected to
be collected in cash.
a. True
b. False
6. When companies sell their
receivables to other companies, the transaction is called factoring.
a. True
b. False
7. Of the two methods of accounting
for uncollectible receivables, the allowance method provides in advance for uncollectible receivables.
a.
True
b. False
8.
A
disadvantage of factoring is that the company selling its receivables
immediately receives cash.
a. True
b. False
9. Small companies can use either
the direct write-off method or the allowance method.
a. True
b. False
10. GAAP requires companies with a
large amount of receivables to use the allowance method.
a. True
b. False
11.
The
direct writeoff method records bad debt expense when an account is determined
to be uncollectible.
a. True
b. False
12. Generally accepted accounting
principles do not normally allow the use of the direct write-off method of accounting for uncollectible accounts.
a.
True
b. False
13. The direct write-off method
records bad debt expense in the year the specific account receivable is determined
to be uncollectible.
a.
True
b. False
14.
No
allowance account is used with the direct write-off method.
a. True
b. False
15. When using the direct write-off
method of accounting for uncollectible receivables, the account Allowance for Doubtful Accounts is debited when a
specific account is determined to be uncollectible.
a.
True
b. False
16. When an account receivable that
has been written off is subsequently collected, the account receivable must
first be reinstated before recording
the receipt of payment.
a.
True
b. False
17. Although Allowance for Doubtful
Accounts normally has a credit balance, it may have either a debit or a credit balance before adjusting entries are
recorded at the end of the accounting period.
a.
True
b. False
18. Allowance for Doubtful Accounts
is a liability account.
a. True
b. False
19. When using the percent of sales
method of estimating uncollectibles the entry to record bad debt expense
includes a credit to Accounts
Receivable.
a.
True
b. False
20. The difference between the
balance in Accounts Receivable and the balance in the Allowance for Doubtful Accounts is called the net realizable value
of the receivables.
a.
True
b. False
21. When the allowance method for
accounting for uncollectible receivables is used, net income is reduced when a specific receivable is written off.
a.
True
b. False
22. At the end of a period (before
adjustment), Allowance for Doubtful Accounts has a credit balance of $250. The net credit sales for the period total
$500,000. If the company estimates
uncollectible accounts expense at 1% of net credit
sales, the amount of bad debt expense to be recorded in an adjusting entry is
$4,750.
a.
True
b. False
23. At the end of a period (before
adjustment), Allowance for Doubtful Accounts has a debit balance of $500. Net credit
sales for the period total $800,000. If
bad debt expense is estimated at 1% of net credit sales, the amount of bad debt expense to be recorded in the
adjusting entry is $8,500.
a.
True
b. False
24. At the end of a period (before
adjustment), Allowance for Doubtful Accounts has a debit balance of $2,000. The Accounts Receivable balance is analyzed by
aging the accounts and the amount estimated to be uncollectible is $15,000. The amount to be recorded in the adjusting
entry for the bad debt expense is $15,000.
a. True
b. False
25. At the end of a period (before
adjustment), Allowance for Doubtful Accounts has a credit balance of
$5,000. The Accounts Receivable balance is analyzed by aging the accounts and
the amount estimated to be uncollectible is $50,000. The amount to be recorded
in the adjusting entry for the Bad Debt Expense is $45,000.
a. True
b. False
26. When using the analysis of
receivables method for estimating uncollectible receivables, the amount
computed in the analysis is usually
the amount that would be recorded in the end-of-period adjusting entry.
a.
True
b. False
27. The balance in Allowance for
Doubtful Accounts at the end of the year includes the total of all accounts
written off since the beginning of the
year.
a.
True
b. False
28. When accounting for
uncollectible receivables and using the percentage of sales method, the matching
principle is violated.
a.
True
b. False
29. A primary difference between the
direct write-off and allowance method is whether or not bad debts is based on a percentage of sales.
a.
True
b. False
30. The due date of a 60-day note
dated July 10 is September 10.
a. True
b. False
31. The maturity value of a 12%,
60-day note for $5,000 is $5,600.
a. True
b. False
32.
The
maturity value of a note receivable is always the same as its face value.
a. True
b. False
33. The interest on a 6%, 60-day
note for $5,000 is $300.
a. True
b. False
34. The party promising to pay a
note at maturity is the maker.
a. True
b. False
35. In computing the maturity date
of a note, the date the note is issued is included but the due date is omitted.
a. True
b. False
36.
If
a promissory note is dishonored, the payee should still record interest revenue.
a. True
b. False
37. The equation for computing
interest on an interest-bearing note is as follows: Interest = Maturity Value ×
Interest Rate × Time.
a.
True
b. False
38. If the maker of a note fails to
pay the debt on the due date, the note is said to be dishonored.
a. True
b. False
39. When a note is received from a
customer on account, it is recorded by debiting Notes Receivable and crediting Accounts Receivable.
a.
True
b. False
40. When a note is written to settle
an open account, no entry is necessary.
a. True
b. False
41. The balance of Allowance for
Doubtful Accounts is added to Accounts Receivable on the balance sheet.
a. True
b. False
42. Receivables that are expected to
be collected in cash in eighteen months or less are reported in the current
asset section of the balance sheet.
a.
True
b. False
43. The accounts receivables
turnover ratio is computed by dividing total gross sales by the average net
receivables during the year.
a.
True
b. False
44. The accounts receivable turnover
measures the length of time in days it takes to collect a receivable.
a. True
b. False
45.
The
number of days’ sales in receivables is an estimate of the length of time the
accounts receivables have been outstanding.
a. True
b. False
46. A note receivable due in 18
months is listed on the balance sheet under the caption
a. long-term liabilities
b. fixed assets
c. current assets
d. investments
47.
The
receivable that is usually evidenced by a formal, written instrument of credit
is a(n)
a. trade receivable
b. note receivable
c. accounts receivable
d. income tax receivable
48.
Which
of the following receivables would not be
classified as an "other receivable”?
a. advance to an employee
b. interest receivable
c. refundable income tax
d. notes receivable
49.
Other
receivables includes all of the following except
a. notes receivable
b. receivables from employees
c. taxes receivable
d.
interest
receivable
50. Notes or accounts receivables
that result from sales transactions are often called
a. nontrade receivables
b. trade receivables
c. merchandise receivables
d. sales receivables
51.
Which
statement is not true?
a. Current assets are normally
reported in order of their liquidity.
b.
Disclosures
related to receivables are reported on the financial statement notes.
c. Cash and cash equivalents are
the first items reported under current assets.
d.
All
receivables that are expected to be realized in cash beyond 265 days are reported
in the noncurrent
assets section.
52. The term "receivables"
includes all
a. money claims against other
entities
b. merchandise to be collected from
individuals or companies
c. cash to be paid to creditors
d. cash to be paid to debtors
53. If collection of another receivable
is expected beyond one year, it is classified as a(n)
a. other receivable under
noncurrent assets
b. other receivable under current
assets
c. investment under current assets
d.
investment
under noncurrent assets
54.
When
does an account become uncollectible?
a. when accounts receivable is
converted into notes receivable
b. when a discount is availed on
notes receivable
c. there is no general rule for
when an account becomes uncollectible
d. at the end of the fiscal year
55. The two methods of accounting
for uncollectible receivables are the allowance method and the
a. equity method
b. direct write-off method
c. interest method
d. cost method
56. The direct write-off method of
accounting for uncollectible accounts
a. emphasizes balance sheet
relationships
b. is often used by small companies
and companies with few receivables
c. emphasizes cash realizable value
d. emphasizes the matching of
expenses with revenues
57.
Under
the direct write-off method of accounting for uncollectible accounts, Bad Debts
Expense is debited
a. at the end of each accounting
period
b. when a credit sale is past due
c. whenever a predetermined amount
of credit sales have been made
d. when an account is determined to
be worthless
58. An alternative name for bad debt
Expense is a(n)
a. collection expense
b. credit loss expense
c. uncollectible accounts expense
d. deadbeat expense
59. Two methods of accounting for
uncollectible accounts are the
a. direct write-off method and the
allowance method
b. allowance method and the accrual
method
c. allowance method and the net
realizable method
d. direct write-off method and the
accrual method
60.
The
operating expense recorded from uncollectible receivables can be called all of
the following except
a.
accounts
receivable
b.
bad
debt expense
c. doubtful accounts expense
d. uncollectible accounts expense
61.
Indications
that an account may be uncollectible include all of the following except
a.
the
customer closes its business
b. the customer is making small but
regular payments
c. the customer files for
bankruptcy
d.
the
customer cannot be located
62. Selling receivables is called
a.
factoring
b. sales revenue
c. a factor
d. sold receivables
63. If the direct write-off method
of accounting for uncollectible receivables is used, what general ledger
account is credited to write off a
customer's account as uncollectible?
a. Uncollectible Accounts Expense
b. Accounts Receivable
c. Allowance for Doubtful Accounts
d. Interest Expense
64. One of the weaknesses of the
direct write-off method is that it
a. understates accounts receivable
on the balance sheet
b. violates the matching principle
c. is too difficult to use for many
companies
d. is based on estimates
65. The Lowery Co. uses the direct
write-off method of accounting for uncollectible accounts receivable. Lowery has a
customer whose accounts receivable balance has been determined to likely be
uncollectible. The entry to write off
this account would be which of the following?
a. debit Allowance for Doubtful
Accounts; credit Accounts Receivable
b. debit Sales Returns and
Allowance; credit Accounts Receivable
c. debit Bad Debt Expense; credit
Allowance for Doubtful Accounts
d. debit Bad Debt Expense; credit
Accounts Receivable
66. If the direct write-off method
of accounting for uncollectible receivables is used, what general ledger
account is debited to write off a
customer's account as uncollectible?
a. Uncollectible Accounts Receivable
b. Accounts Receivable
c. Allowance for Doubtful Accounts
d. Bad Debt Expense
67. If the allowance method of
accounting for uncollectible receivables is used, what general ledger account
is debited to write off a customer's
account as uncollectible?
a. Uncollectible Accounts Expense
b. Allowance for Doubtful Accounts
c. Accounts Receivable
d. Interest Expense
68. After the accounts are adjusted
and closed at the end of the fiscal year, Accounts Receivable has a balance of $340,000
and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of the accounts receivable?
a. $51,000
b. $289,000
c. $340,000
d. $391,000
69. If the allowance method of
accounting for uncollectible receivables is used, what general ledger account
is credited to write off a customer's
account as uncollectible?
a. Uncollectible Accounts Expense
b. Accounts Receivable
c. Allowance for Doubtful Accounts
d. Interest Expense
70. On the balance sheet, the amount
shown for the Allowance for Doubtful Accounts is equal to the
a. uncollectible accounts expense
for the year
b. total of the accounts
receivables written-off during the year
c. total estimated uncollectible
accounts as of the end of the year
d. sum of all accounts that are
past due
71. What is the type of account and
normal balance of Allowance for Doubtful Accounts?
a. contra asset, credit
b. asset, debit
c. asset, credit
d. contra asset, debit
72.
When
the allowance method is used to account for uncollectible accounts, Bad Debts
Expense is debited when
a. a customer's account becomes
past due
b. an account becomes bad and is
written off
c. a sale is made
d. management estimates the amount
of uncollectibles
73. A debit balance in the Allowance
for Doubtful Accounts
a. is the normal balance for that
account
b. indicates that actual bad debt
write-offs have been less than what was estimated
c. cannot occur if the percentage
of receivables method of estimating bad debts is used
d. indicates that actual bad debt
write-offs have exceeded previous provisions for bad debts
74. To record estimated
uncollectible receivables using the allowance method, the adjusting entry would
be a
a. debit to Bad Debts Expense and a
credit to Allowance for Doubtful Accounts
b. debit to Accounts Receivable and
a credit to Allowance for Doubtful Accounts
c. debit to Allowance for Doubtful
Accounts and a credit to Accounts Receivable
d. debit to Loss on Credit Sales
and a credit to Accounts Receivable
75.
Under
the allowance method, when a year-end adjustment is made for estimated
uncollectible accounts
a. liabilities decrease
b. net income is unchanged
c. total assets are unchanged
d. total assets decrease
76. Tanning Company analyzes its
receivables to estimate bad debt expense. The accounts receivable balance is $390,000
and credit sales are $1,300,000. An aging of accounts receivable shows that
approximately 5% of the outstanding
receivables will be uncollectible. What adjusting entry will Tanning Company
make if the Allowance for Doubtful
Accounts has a credit balance of $2,500 before adjustment?
|
a.
Bad Debt Expense
Allowance
for Doubtful Accounts
|
17,000
|
17,000
|
|
b.
Bad Debt Expense
Allowance
for Doubtful Accounts
|
19,500
|
19,500
|
|
c.
Bad Debt Expense
Allowance
for Doubtful Accounts
|
22,000
|
22,000
|
|
d.
Bad Debt Expense
Allowance
for Doubtful Accounts
|
65,000
|
65,000
|
77. You have just received notice
that a customer of yours with an Account Receivable balance of $100 has gone bankrupt and will not make any future
payments. Assuming you use the allowance
method, the entry you make is to
a. debit Bad Debt Expense and
credit Allowance for Doubtful Accounts
b. debit Bad Debt Expense and
credit Accounts Receivable
c. debit Allowance for Doubtful
Accounts and credit Accounts Receivable
d. debit Allowance for Doubtful
Accounts and credit Bad Debt Expense
78. The balance in Allowance for
Doubtful Accounts will directly impact the end-of-period adjustment for the bad
debt expense when using which of the
following methods?
a. allowance method based on aging
the receivables
b. direct write-off method
c. accrual method
d. declining value method
79. An aging of a company's accounts
receivable indicates the estimate of uncollectible receivables totals
$7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the
adjustment to record the bad debt expense for the period will require a
a. debit to Bad Debt Expense for
$8,600
b. debit to Bad Debt Expense for
$7,900
c. debit to Bad Debt Expense for
$7,200
d. credit to Allowance for Doubtful
Accounts for $700
80. An aging of a company's accounts
receivable indicates that the estimate of uncollectible accounts totals
$6,400. If Allowance for Doubtful Accounts has a $1,300 debit balance, the
adjustment to record the bad debt expense for the period will require a
a. debit to Bad Debt Expense for
$7,700
b. debit to Bad Debt Expense for
$6,400
c. debit to Bad Debt expense for
$5,100
d. credit to Allowance for Doubtful
Accounts for $1,300
81. An aging of a company's accounts
receivable indicates that the estimate of the uncollectible accounts totals $4,000. If Allowance for Doubtful Accounts has a $800
credit balance, the adjustment to record the bad debt expense for the period will require a
a. debit to Allowance for Doubtful
Accounts for $3,200
b. debit to Bad Debt Expense for
$3,200
c. debit to Allowance for Doubtful
Accounts for $4,000
d. credit to Allowance for Doubtful
Accounts for $4,000
82. The collection of an account
that had been previously written off under the allowance method of accounting
for uncollectibles
a. will increase net income in the
period it is collected
b. will decrease net income in the
period it is collected
c. does not affect net income in
the period it is collected
d. requires a correcting entry for
the period in which the account was written off
83. Allowance for Doubtful Accounts
has a credit balance of $2,100 at the end of the year (before adjustment), and
an analysis of customers' accounts
indicates uncollectible receivables of $19,700.
Which of the following entries records
the proper adjustment for bad debt expense?
a. debit Allowance for Doubtful
Accounts, $17,600; credit Bad Debt Expense, $17,600
b. debit Allowance for Doubtful
Accounts, $21,800; credit Bad Debt Expense, $21,800
c. debit Bad Debt Expense, $21,800;
credit Allowance for Doubtful Accounts, $21,800
d. debit Bad Debt Expense, $17,600;
credit Allowance for Doubtful Accounts, $17,600
84. Allowance for Doubtful Accounts
has a debit balance of $1,100 at the end of the year (before adjustment), and
an analysis of customers' accounts
indicates uncollectible receivables of $12,900.
Which of the following entries records
the proper adjustment for bad debt expense?
a. debit Bad Debt Expense, $14,000;
credit Allowance for Doubtful Accounts, $14,000
b. debit Allowance for Doubtful
Accounts, $14,000; credit Bad Debt
Expense, $14,000
c. debit Allowance for Doubtful
Accounts, $11,800; credit Bad Debt Expense, $11,800
d. debit Bad Debt Expense, $11,800;
credit Allowance for Doubtful Accounts, $11,800
85. Allowance for Doubtful Accounts
has a debit balance of $600 at the end of the year (before adjustment), and an analysis of accounts in the customers
ledger indicates uncollectible receivables of $13,000. Which of the following entries records the proper adjusting entry for bad debt expense?
a.
debit
Bad Debt Expense, $600; credit Allowance for Doubtful Accounts, $600
b.
debit
Bad Debt Expense, $12,400; credit Allowance for Doubtful Accounts, $12,400
c.
debit
Allowance for Doubtful Accounts, $600; credit Bad Debt Expense, $600
d.
debit
Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600
86. At the beginning of the year,
the balance in Allowance for Doubtful Accounts is a credit of $760. During the year, $120 of previously written
off accounts are reinstated and accounts totaling $740 are written-off as uncollectible. The end-of-year balance (before adjustment)
in Allowance for Doubtful Accounts should be
a. $760
b. $120
c. $140
d. $740
87. Jefferson uses the percent of
method of estimating uncollectible expenses. Based on past history, 2% of
credit sales are expected to be
uncollectible. Sales for the current year are $5,550,000. Which of the
following is correct?
a. Uncollectible accounts are
estimated to be $55,500.
b.
Uncollectible
accounts are estimated to be $111,000.
c.
Bad
debt expense is estimated to be $5,550.
d. Bad debt expense is estimated to
be $11,100.
88. Jefferson uses the percent of
sales method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be
uncollectible. Sales for the current year are $5,550,000. Which of the
following is correct regarding the
entry to record estimated uncollectible receivables?
a.
Cash
will be debited
b. Bad Debt Expense will be
credited
c. Allowance for Doubtful Accounts
will be credited
d. Accounts Receivable will be
debited
89.
Miles
uses the allowance method and wrote off the account of James. Miles then
received $559 as partial payment on the account of James. The journal entry to
record the initial write-off includes a
a. debit to Allowance for Doubtful
Accounts
b.
credit
to Cash
c.
debit
to Accounts Receivable, James
d.
credit
to Bad Debt Expense
90. Using the allowance method of
accounting for uncollectible receivables, the entry to reinstate a specific
receivable previously written off
would include a
a. credit to Bad Debt Expense
b. credit to Accounts Receivable
c. debit to Allowance for Doubtful
Accounts
d. debit to Accounts Receivable
91. Dalton Company uses the
allowance method to account for uncollectible receivables. Dalton has determined that the Irish Company account is
uncollectible. To write off this
account, Dalton should debit
a. Bad Debt Expense and credit
Accounts Receivable
b. Bad Debt Expense and credit
Allowance for Doubtful Accounts
c. Allowance for Doubtful Accounts
and credit Accounts Receivable
d. Accounts Receivable and credit
Allowance for Doubtful Accounts
92. In accounting for uncollectible
receivables, the balance in Allowance for Doubtful Accounts will directly
impact the amount of the adjustment
when applying which method?
a. direct write-off method
b. percentage of sales method
c. analysis of receivables method
d. both percentage of sales and
analysis of receivables methods
93. Abbott Company uses the
allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of net credit sales will be
uncollectible. On January 1, the
Allowance for Doubtful Accounts had a credit balance of $2,400. During the year, Abbott wrote off accounts
receivable totaling $1,800 and made credit sales of $100,000. There were no sales returns or sales discounts
during the year. After the adjusting
entry, the December 31, balance in the
Bad Debt Expense will be
a. $1,200
b. $3,000
c. $3,600
d. $7,200
94. A company uses the allowance
method to account for uncollectible accounts receivables. When the firm writes off a specific customer's account
receivable
a.
total
current assets are reduced
b.
total
expenses for the period are increased
c.
net
realizable value of accounts receivable increases
d.
there
is no effect on total current assets or total expenses
95. Allowance for Doubtful Accounts
has a credit balance of $1,300 at the end of the year (before adjustment). The company
prepares an analysis of customers' accounts to estimate the amount of
uncollectible accounts of $41,900. Which
of the following adjusting entries would be made to record the Bad Debt Expense
for the year?
a. debit Allowance for Doubtful
Accounts, $40,600; credit Bad Debt Expense, $40,600
b. debit Allowance for Doubtful
Accounts, $43,200; credit Bad Debt Expense, $43,200
c. debit Bad Debt Expense, $43,200;
credit Allowance for Doubtful Accounts, $43,200
d. debit Bad Debt Expense, $40,600;
credit Allowance for Doubtful Accounts, $40,600
96. Allowance for Doubtful Accounts
has a debit balance of $2,300 at the end of the year (before adjustment). The company prepares an analysis of customers'
accounts and estimates the amount of uncollectible accounts to be $31,900. Which of the following adjusting entries is
needed to record the Bad Debt Expense for the year?
a. debit Bad Debt Expense, $34,200;
credit Allowance for Doubtful Accounts, $34,200
b. debit Allowance for Doubtful
Accounts, $34,200; credit Bad Debt Expense, $34,200
c. debit Allowance for Doubtful
Accounts, $29,600; credit Bad Debt Expense, $29,600
d. debit Bad Debt Expense, $29,600;
credit Allowance for Doubtful Accounts, $29,600
97. Allowance for Doubtful Accounts
has a debit balance of $2,500 at the end of the year (before adjustment), and
bad debt expense is estimated at 4% of
net credit sales. If net credit sales
are $800,000, the amount of the adjusting entry
to record the estimate of the uncollectible accounts is
a. $29,500
b. $34,500
c. $32,000
d. cannot be determined
98. Allowance for Doubtful Accounts
has a credit balance of $800 at the end of the year (before adjustment), and an analysis of accounts in the customer ledger
indicates the estimated amount of uncollectible accounts should be $16,000. Based on the estimate above, which of the
following adjusting entries should be made?
a.
debit
Bad Debt Expense, $800; credit Allowance for Doubtful Accounts, $800
b.
debit
Bad Debt Expense, $15,200; credit Allowance for Doubtful Accounts, $15,200
c.
debit
Allowance for Doubtful Accounts, $800; credit Bad Debt Expense, $800
d.
debit
Bad Debt Expense, $16,800; credit Allowance for Doubtful Accounts, $16,800
99. The allowance method of
estimating uncollectible accounts receivable based on an analysis of
receivables shows that $640 of
accounts receivables are uncollectible.
The Allowance for Doubtful Accounts has a debit balance of $110. The adjusting entry at the end of the year will
include a credit to Allowance for Doubtful Accounts in the amount of:
a. $110
b. $640
c. $530
d. $750
100. Allowance for Doubtful Accounts
has a credit balance of $500 at the end of the year (before adjustment), and
bad debt expense is estimated at 3% of
net credit sales. If net credit sales
are $300,000, the amount of the adjusting entry
to record the estimated uncollectible accounts receivables is
a. $8,500
b. $9,500
c. $9,000
d. Cannot be determined
101. Allowance for Doubtful Accounts
is classified as a(n) and has a normal balance.
a. owners’ equity, credit
b. contra asset, debit
c. owners’ equity, debit
d. contra asset, credit
102. Under the allowance method of
accounting for uncollectible receivables, writing off an uncollectible account.
a. affects only income statement
accounts
b. is not an acceptable practice
c. affects only balance sheet
accounts
d. affects both balance sheet and
income statement accounts
103. When comparing the direct
write-off method and the allowance method of accounting for uncollectible
receivables, a major difference is
that the direct write-off method
a. uses a percentage of sales
method to estimate uncollectible accounts
b. is used primarily by large
companies with many receivables
c. is used primarily by small
companies with few receivables
d. uses an allowance account
104. When a company uses the
allowance method of accounting for uncollectible receivables, which entry would
not be found in the general journal?
|
a.
Bad Debt Expense
Allowance
for Doubtful Accounts
|
500
|
500
|
|
b.
Bad Debt Expense
Accounts
Receivable, Bob Smith
|
500
|
500
|
|
c.
Cash
|
300
|
|
|
Allowance for Doubtful Accounts Accounts Receivable, Bob Smith
|
200
|
500
|
|
d.
Cash
Accounts
Receivable, Bob Smith
|
500
|
500
|
105. When a company uses the
allowance method of accounting for uncollectible receivables, the entry to
reinstate a previously written off
account would include a
a. credit to Bad Debt Expense
b. debit to Bad Debt Expense
c. debit to Allowance for Doubtful
Accounts
d. credit to Allowance for Doubtful
Accounts
106.
The
amount for which a promissory note is written is called the
a.
realizable
value
b.
maturity
value
c.
face
value
d.
proceeds
107. The amount of the promissory
note plus the interest earned on the due date is called the
a.
interest
value
b.
maturity
value
c.
face
value
d.
issuance
value
108. A 60-day, 12% note for $7,000,
dated April 15, is received from a customer on account. The face value of the note is
a. $6,860
b. $7,140
c. $7,840
d. $7,000
109. A 60-day, 9% note for $10,000,
dated May 1, is received from a customer on account. The maturity value of the note is
a. $10,000
b. $10,150
c. $10,900
d. $9,100
110. Interest on a note can be
calculated without knowledge of the
a. fair value of the note
b. rate of interest
c. note duration
d. principal amount
111. On October 1, Black Company
receives a 9% interest-bearing note from Reese Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Black should record interest
revenue of
a. $0
b. $450
c. $900
d. $1,800
112.
If
the maker of a promissory note fails to pay the note on the due date, the note
is said to be
a. displaced
b. disallowed
c. dishonored
d. discounted
113. The journal entry to record a
note received from a customer to replace an account is
a. debit Notes Receivable; credit
Accounts Receivable
b. debit Accounts Receivable;
credit Notes Receivable
c. debit Cash; credit Notes
Receivable
d. debit Notes Receivable; credit
Notes Payable
114. A $6,000, 60-day, 12% note
recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is
a. debit Cash, $6,120; credit Notes
Receivable, $6,120
b. debit Accounts Receivable,
$6,120; credit Notes Receivable, $6,000; credit Interest Receivable, $120
c. debit Notes Receivable, $6,060;
credit Accounts Receivable, $6,060
d. debit Accounts Receivable,
$6,120; credit Notes Receivable, $6,000; credit Interest Revenue, $120
115.
When
referring to a note receivable or promissory note
a. the maker is the party to whom
the money is due
b. the note is not considered a
formal credit instrument
c. the note cannot be factored to
another party
d. the note may be used to settle
an accounts receivable
116. When a company receives an
interest-bearing note receivable, it will
a. debit Notes Receivable for the
maturity value of the note
b. debit Notes Receivable for the
face value of the note
c. credit Notes Receivable for the
maturity value of the note
d. credit Notes Receivable for the
face value of the note
117. Paper Company receives a $6,000,
3-month, 6% promissory note from Dame Company in settlement of an open accounts receivable. What entry will Paper Company make upon
receiving the note?
|
a.
|
Notes
Receivable 6,000
Accounts Receivable—Dame
Company 6,000
|
|
b.
|
Notes
Receivable
6,090
Accounts Receivable—Dame
Company 6,090
|
|
c.
|
Notes
Receivable
6,090
Accounts Receivable—Dame
Company 6,000
Interest Revenue 90
|
|
d.
|
Notes
Receivable
6,000
Interest
Revenue
90
Accounts Receivable—Dame
Company 6,000
Interest Revenue 90
|
118. The maturity value of a $40,000,
9%, 40-day note receivable dated July 3 is
a. $40,000
b. $40,400
c. $43,600
d. $44,000
119. Harper Company lends Hewell
Company $40,000 on March 1, accepting a four-month, 6% interest note. Harper Company prepares financial statements on
March 31. What adjusting entry should be made before the financial statements can be prepared?
a.
Cash 200
Interest Revenue 200
|
b.
Interest Receivable
Interest
Revenue
|
800
|
800
|
|
c.
Interest Receivable
Interest
Revenue
|
200
|
200
|
|
d.
Note Receivable
Cash
|
40,000
|
40,000
|
120. On August 1, Kim Company
accepted a 90-day note receivable as payment for services provided to Hsu Company.
The terms of the note were $20,000 face value and 6% interest. On October 30, the journal entry to record the collection of the note should
include a
a. credit to Notes Receivable for
$20,300
b. debit to Interest Receivable for
$300
c. credit to Interest Revenue for
$300
d. debit to Notes Receivable for
$20,000
121.
Current
assets are usually listed in order
a. of the due date
b. of the size
c. alphabetically
d. of liquidity
122. The accounts receivable turnover
measures
a. how frequently during the year
the accounts receivable are converted to cash
b. the number of days of accounts
receivable outstanding
c. the fair market value of
accounts receivable
d. the efficiency of the accounts
payable function
123. The number of days' sales in
receivables
a. is an estimate of the length of
time the receivables have been outstanding
b. measures the number of times the
receivables turn over each year
c. is net credit sales divided by
average receivables
d. is not meaningful and therefore
is not used
124.
Given
the following information, compute accounts receivable turnover:
|
Gross sales
|
$150,000
|
Accounts receivable, beginning of year
|
$18,000
|
|
Sales
|
135,000
|
Accounts receivable, end of year
|
22,000
|
a. 6.75
b. 7.50
c. 6.13
d. 6.82
125. At the end of the current year,
Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales
for the year total $2,500,000. An
analysis of receivables estimates uncollectible
receivables as $25,000.
Determine the amount of the adjusting entry for bad debt
expense and the adjusted balance of Allowance of Doubtful Accounts, respectively.
a. $19,500 and $25,000 b. $30,500 and $525,000
c. $19,500 and $525,000 d. $30,500 and $25,000
126. At the end of the current year,
Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales
for the year total $2,500,000. An
analysis of receivables estimates uncollectible
receivables as $25,000.
Determine
the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting entry for bad debt expense and
the adjusted balance of Allowance of Doubtful Accounts.)
a. $550,000 b. $544,500
c. $525,000 d. $575,000
127. Other than Accounts Receivable
and Notes Receivable, name other receivables that might be included in the general ledger.
128.
Discuss
the similarities and differences between accounts receivable, notes receivable,
and other receivables.
129. List at least three indicators
that a receivable may be uncollectible.
130.
Discuss
the two methods for recording bad debt expense.
What type of company uses each method?
131. Journalize the following
transactions using the direct write-off method of accounting for uncollectible
receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim
Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs for and received cash in full
payment.
132. Stephanie Roe utilizes the
direct write-off method of accounting for uncollectible receivables. On
September 15 she is notified by the
attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is
expected in the liquidation of Jacob
Marley. Write off the $675 of accounts receivable due from Jacob Marley.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
133. Journalize the following
transactions using the direct write-off method of accounting for uncollectible
receivables:
Feb. 20 Received
$1,000 from Andrew Warren and wrote off the remainder owed of $4,000 as
uncollectible.
May 10 Reinstated
the account of Andrew Warren and received $4,000 cash in full payment.
134. The following journal entries
would be used in one of the two methods of accounting for uncollectible receivables. Identify each.
(a)
Bad Debt Expense 900
Accounts Receivable, Billings 900
(b)
Allowance for Doubtful Accounts 900
Accounts
Receivable, Grover 900
135. Determine the amount to be added
to Allowance for Doubtful Accounts in each of the following cases and indicate the ending balance in each case.
(a)
Credit
balance of $300 in Allowance for Doubtful Accounts just prior to adjustment. Analysis of Accounts Receivable indicates
uncollectible receivables of $8,500.
(b)
Credit
balance of $500 in Allowance for Doubtful Accounts just prior to adjustment. Uncollectible receivables are estimated at 2%
of credit sales, which totaled $1,000,000 for the year.
136. Journalize the following
transactions using the allowance method of accounting for uncollectible receivables.
April 1 Sold merchandise on account to Jim
Dobbs, $7,200. The cost of the
merchandise is $5,400.
June 10 Received
payment for one-third of the receivable from Jim Dobbs and wrote off the
remainder.
Oct. 11 Reinstated the account of Jim Dobbs
and received cash in full payment.
137. At the end of the current year,
Accounts Receivable has a balance of $700,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales
for the year total $3,500,000. Bad debt expense is estimated at 1/2 of 1% of sales.
Determine (a) the amount of the adjusting entry for bad debt
expense; (b) the adjusted balances of Accounts
Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and
(c) the net realizable value of accounts receivable.
138. At the end of the current year,
Accounts Receivable has a balance of $750,000; Allowance for Doubtful Accounts has a debit balance of $6,200; and sales
for the year total $3,500,000. Bad debt
expense is estimated at 1/2 of 1% of sales.
Determine (a) the amount of the adjusting entry for bad debt
expense; (b) the adjusted balances of Accounts
Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and
(c) the net realizable value of accounts receivable.
139. At the end of the current year, Accounts
Receivable has a balance of $90,000; Allowance for Doubtful Accounts has a credit balance of $850; and sales for
the year total $300,000. Bad debt expense is estimated at 2.5% of sales.
Determine (a) the amount of the adjusting entry for uncollectible
accounts; (b) the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt
Expense; and (c) the net realizable value of accounts
receivable.
140. At the end of the current year,
Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales
for the year total $2,500,000. An
analysis of receivables estimates uncollectible
receivables as $25,000.
Determine (a) the amount of the adjusting entry for bad debt
expense; (b) the adjusted balances of Accounts
Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and
(c) the net realizable value of accounts receivable.
141. At the end of the current year,
Accounts Receivable has a balance of $675,000; Allowance for Doubtful Accounts has a debit balance of $5,400; and sales
for the year total $3,000,000. An
analysis of receivables indicates the uncollectible
receivables are estimated to be $45,000.
Determine (a) the amount of the adjusting entry for bad debt
expense; (b) the adjusted balances of Accounts
Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and
(c) the net realizable value of accounts receivable.
142. Discount Mart utilizes the
allowance method of accounting for uncollectible receivables. On December 12
the company receives a $550 check from
Chad Thomas in settlement of Thomas’s $1,100 outstanding accounts receivable. Due to Thomas’s failing health
he is closing his company and is expecting to make no further payments to Discount Mart. Journalize this
declaration.
143. On June 30 (the end of the
period), Brown Company has a credit balance of $2,275 in Allowance for Doubtful Accounts. An evaluation of accounts
receivable indicates that the proper balance should be $30,025. Journalize the appropriate adjusting entry.
144.
a)
The aging of Torme Designs' accounts receivable is shown below. Calculate the
amount of each periodicity range that
is deemed to be uncollectible.
|
|
Est.
Uncollectible Accts
|
||
|
Age Interval:
|
Balance:
|
Percentage:
|
Amount:
|
|
Not past due
|
850,000
|
3.50%
|
|
|
1~30 days past due:
|
47,500
|
5.00%
|
|
|
31~60 days past due:
|
21,750
|
10.00%
|
|
|
61~90 days past due:
|
11,250
|
20.00%
|
|
|
91~180 days past due:
|
5,065
|
30.00%
|
|
|
181~365 days past due:
|
2,500
|
50.00%
|
|
|
Over 365 days past due:
|
1,145
|
95.00%
|
|
|
Total:
|
939,210
|
|
|
b) If the Allowance for Doubtful Accounts has a
credit balance of $1,135.00, record the adjusting entry for the bad debt expense for the year.
145. For each of the following
scenarios, indicate the amount of the adjusting journal entry for bad debt
expense to be recorded, the balance in
allowance for doubtful accounts after adjustment at December 31, and the net
realizable value of accounts
receivable at December 31.
a) Based on an analysis of Simmon’s Company’s
$380,000 balance in Accounts Receivable at December 31, it was estimated that $15,500 will be
uncollectible. There is a credit balance of $1,200 in Allowance for Doubtful Accounts before adjustment.
b) Blake Company had net credit
sales of $900,000 at year-end, and has an Accounts Receivable balance of $425,000
at December 31, and an Allowance for Doubtful Accounts credit balance of
$11,000 before adjustment. Blake estimates bad debt expense as 3/4 of 1%
of net credit sales.
c)
Hidgon
Inc. has a balance of $812,000 in Accounts Receivable at December 31. An analysis of those receivables shows $24,000 will probably not be collected. Before adjusting entries are prepared, the
Allowance for Doubtful Accounts has a
debit balance of $750.
146. A partially competed aging of
receivables schedule for Lindy Designs’ is shown below. Calculate the amount
that is estimated to be uncollectible.
a) Determine the amount estimated
to be uncollectible by completing the aging of receivables schedule. Round calculations to the nearest dollar.
|
|
Est.
Uncollectible Accounts
|
||
|
Age Interval
|
Balance
|
Percentage
|
Amount
|
|
Not past due
|
550,000
|
2.50%
|
|
|
1~30 days past due
|
96,500
|
4.00%
|
|
|
31~60 days past due
|
43,750
|
9.50%
|
|
|
61~90 days past due
|
22,250
|
16.00%
|
|
|
91~180 days past due
|
5,600
|
31.00%
|
|
|
181~365 days past due
|
3,100
|
60.00%
|
|
|
Over 365 days past due
|
1,250
|
95.00%
|
|
|
Total
|
722,450
|
|
|
b) If the Allowance for Doubtful
Accounts has a credit balance of $9,700, record the adjusting entry for
the
bad debt expense for the year.
c)
If
the Allowance for Doubtful Accounts has a debit balance of $9,700, record the
adjusting entry for the bad debt
expense for the year.
147. Discuss the (1) focus and (2)
financial statement emphasis of (a) the percent of sales and (b) the analysis
of receivables methods of estimating
bad debts.
148. Morry Company wrote off the
following accounts receivable as uncollectible for the first year of its
operations ending December 31:
Required:
|
Customer
|
Amount
|
|
J. Jackson
|
$10,000
|
|
L. Stanton
|
9,500
|
|
C. Barton
|
13,100
|
|
S. Fenton
|
2,400
|
|
Total
|
$35,000
|
(1)
Journalize
the write-offs for the current year under the direct write-off method.
(2)
Journalize
the write-offs for the current year under the allowance method. Also, journalize
the adjusting entry for uncollectible receivables assuming the company made $2,400,000
of credit sales during the year and the industry average for uncollectible receivables is 1.50% of credit sales.
(3)
How
much higher or lower would Morry Company’s net income have been under the direct
write-off method than under the allowance method?
149. Fellows Corporation has
determined that the $2,700 accounts receivable due from Andrew Stevens is uncollectible. Compare the journal entry that is required
under the direct write-off method to the journal entry that is required using the allowance method.
150. For a business that uses the
allowance method of accounting for uncollectible receivables:
(a) Journalize the entries to record
the following:
(1)
Record
the adjusting entry at December 31, the end of the first fiscal year, to record
the bad debt expense. The accounts
receivable account has a balance of $800,000,
and the contra asset account before adjustment has a debit balance of
$600. Analysis of the receivables indicates uncollectible receivables of
$18,000.
(2)
In
March of the next year, the $350 owed by Fronk Co. on account is written off as uncollectible.
(3)
In
November of the next year, $200 of the Fronk Co. account is reinstated and payment of that amount is received.
(4)
In
December of the next year, $400 is received on the $600 owed by Dodger Co. and the remainder is written off as
uncollectible.
(b)
Redo
the entries in steps (2), (3), and (4) assuming the company uses the direct
write-off method.
151. Sunshine Service Center received
a 120-day, 6% note for $40,000, dated April 12 from a customer on account.
a.
Determine
the due date of the note.
b.
Determine
the maturity value of the note.
c.
Journalize
the entry to record the receipt of the payment of the note at maturity.
152.
Fill
in the blanks related to the characteristics of a promissory note.
1.
The
party promising to pay the note is called the .
2.
The
amount for which the note is written is called the amount.
3.
The
date the note is to be paid is the date.
4.
The
time between the date when a note is written and the time it must be paid is
called the of the note
153. Determine the due date and
amount of interest due at maturity on the following notes:
|
|
Origination
|
Face
|
Term
|
Interest
|
Maturity
|
Interest
|
|
Date
|
Amount
|
of Note
|
Rate
|
Date
|
Amount
|
|
|
(a)
|
Mar. 15
|
$8,000
|
60 days
|
9%
|
_______
|
_______
|
|
(b)
|
May 1
|
$12,000
|
90 days
|
8%
|
_______
|
_______
|
154.
Blackwell
Industries received a 120-day, 9% note for $180,000, dated August 10 from a
customer on account.
Required:
1.
Determine
the due date of the note.
2.
Determine
the maturity value of the note.
3.
Journalize
the entry to record the receipt of the payment of the note at maturity.
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