Question 1

A company has a debit balance of $3,500 in the Allowance for Doubtful Accounts.It estimates that 2% of net credit sales of $1,500,000 will be uncollectible.The required journal entry to record bad debt expense should include a debit to:

Accepted Answer

A)  Allowance for Doubtful Accounts for $30,000.
B)  Allowance for Doubtful Accounts for $33,500.
C)  Bad Debt Expense for $33,500.
D)  Bad Debt Expense for $30,000.

Question 2

Which of the following is true about interest receivable?

Accepted Answer

A)  It is an asset reported on the balance sheet.
B)  It is a temporary account reported on the income statement.
C)  It is a permanent account reported on the income statement.
D)  It represents the amount of interest the company has received on promissory notes.

Question 3

Use the information above to answer the following question.What is the amount of Bad Debt Expense for 2015?

Accepted Answer

A)  $2,000
B)  $5,050
C)  $5,000
D)  $4,950

Question 4

Using the allowance method,how would net income and the accounts receivable turnover ratio be affected when a customer's account balance,which is known to be uncollectible,is written off?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option D

Question 5

Extending credit to customers will not result in which of the following additional costs?

Accepted Answer

A)  Increased wage costs will be incurred to evaluate customer creditworthiness,track what each customer owes,and follow up to ensure collection.
B)  Bad debt expense will result when amounts cannot be collected from customers.
C)  Delayed receipt of cash may result in requiring the company to take out short-term loans and incur interest costs.
D)  Decreased gross profit from reduced sales.

Question 6

An allowance for doubtful accounts is a contra-account that offsets:

Accepted Answer

A)  bad debt expense.
B)  cash.
C)  net income.
D)  accounts receivable.

Question 7

Use the information above to answer the following question.The required entry(ies) on May 29 to record the recovery is:

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option D

Question 8

The unadjusted trial balance at the end of the year includes the following:  The company uses the allowance method and has completed the aging schedule which indicates $5,800 of accounts are estimated uncollectible.What is the amount of bad debt expense to be recorded for the year?

Accepted Answer

A)  $5,800
B)  $4,800
C)  $6,800
D)  $7,800

Question 9

The days-to-collect measure is calculated as:

Accepted Answer

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.

Question 10

The Grass is Greener Corporation is owed $11,890 from a client for landscaping.The account is overdue and the client is having difficulty paying.Why might the Grass is Greener Corporation extend a note receivable to the client?

Accepted Answer

A)  The loan will decrease the net income of the Grass is Greener Corporation for the current accounting period.
B)  The loan will strengthen the Grass is Greener Corporation's legal right to be repaid with interest.
C)  The loan will reduce the tax liability for the Grass is Greener Corporation.
D)  The loan will eliminate any doubts of collection of the amount due.

Question 11

Which of the following statements regarding methods of accounting for bad debts is true?

Accepted Answer

A)  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.
B)  The two methods of accounting for bad debts that are acceptable under GAAP are the allowance method and the direct write-off method.
C)  When the allowance method is used,if actual results differ from the estimates,the prior year financial statements must be corrected.
D)  When the allowance method is used,bad debt expense is equal to the write-offs that occurred during the period.

Question 12

Under the direct write-off method,the entry to write off a customer's account would be:

Accepted Answer

A)  Debit Bad Debt Expense,credit Allowance for Doubtful Accounts.
B)  Debit Bad Debt Expense,credit Accounts Receivable.
C)  Debit Write-off Expense,credit Accounts Receivable.
D)  Debit Sales,credit Accounts Receivable.

Question 13

Interest revenue from notes receivable is reported on a multiple step income statement as a part of Income from Operations.

Accepted Answer

A) True 
 B)False

Question 14

Use the information above to answer the following question.The receivables turnover ratio for 2014 is closest to:

Accepted Answer

A)  8.93
B)  8.48
C)  8.71
D)  9.14

Question 15

If an uncollectible account,previously written off,is recovered:

Accepted Answer

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

Question 16

Total doubtful accounts at the end of the year are estimated to be $25,000 based on an aging of accounts receivable.If the balance in the Allowance for Doubtful Accounts is a $7,000 debit before adjustment,what will be the amount of bad debt expense recorded for the period?

Accepted Answer

A)  $7,000.
B)  $18,000.
C)  $25,000.
D)  $32,000.

Question 17

When a company routinely sells on credit,it is inevitable that some of its customers will not pay the amount owed.

Accepted Answer

A) True 
 B)False

Question 18

Use the information above to answer the following question.What was the total amount of cash collections from accounts receivable customers this year?

Accepted Answer

A)  $846,950
B)  $850,000
C)  $849,800
D)  $847,150

Question 19

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 ending balance in the allowance for doubtful accounts account will be:

Accepted Answer

A)  $8,300.
B)  $5,400.
C)  $2,900.
D)  $5,600.

Question 20

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 an unadjusted 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:

Accepted Answer

A)  $5,000.
B)  $7,000.
C)  $7,500.
D)  $8,000

Exam 8: Receivables, Bad Debt Expense, and Interest Revenue

An allowance for doubtful accounts is a contra-account that offsets:

Correct Answer
verified

The unadjusted trial balance at the end of the year includes the following: The company uses the allowance method and has completed the aging schedule which indicates $5,800 of accounts are estimated uncollectible.What is the amount of bad debt expense to be recorded for the year?

Correct Answer
verified

Total doubtful accounts at the end of the year are estimated to be $25,000 based on an aging of accounts receivable.If the balance in the Allowance for Doubtful Accounts is a $7,000 debit before adjustment,what will be the amount of bad debt expense recorded for the period?

Correct Answer
verified

Use the information above to answer the following question.The required entry(ies) on May 29 to record the recovery is:

Correct Answer
verified

Using the allowance method,how would net income and the accounts receivable turnover ratio be affected when a customer's account balance,which is known to be uncollectible,is written off?

Correct Answer
verified

The days-to-collect measure is calculated as:

Correct Answer
verified

Which of the following statements regarding methods of accounting for bad debts is true?

Correct Answer
verified

Extending credit to customers will not result in which of the following additional costs?

Correct Answer
verified

A company has a debit balance of $3,500 in the Allowance for Doubtful Accounts.It estimates that 2% of net credit sales of $1,500,000 will be uncollectible.The required journal entry to record bad debt expense should include a debit to:

Correct Answer
verified

Under the direct write-off method,the entry to write off a customer's account would be:

Correct Answer
verified

The Grass is Greener Corporation is owed $11,890 from a client for landscaping.The account is overdue and the client is having difficulty paying.Why might the Grass is Greener Corporation extend a note receivable to the client?

Correct Answer
verified

Use the information above to answer the following question.What was the total amount of cash collections from accounts receivable customers this year?

Correct Answer
verified

Correct Answer
verified

Use the information above to answer the following question.The receivables turnover ratio for 2014 is closest to:

Correct Answer
verified

Interest revenue from notes receivable is reported on a multiple step income statement as a part of Income from Operations.

Correct Answer
verified

When a company routinely sells on credit,it is inevitable that some of its customers will not pay the amount owed.

Correct Answer
verified

Correct Answer
verified

Use the information above to answer the following question.What is the amount of Bad Debt Expense for 2015?

Correct Answer
verified

Which of the following is true about interest receivable?

Correct Answer
verified

If an uncollectible account,previously written off,is recovered:

Correct Answer
verified

Exam 8: Receivables, Bad Debt Expense, and Interest Revenue

An allowance for doubtful accounts is a contra-account that offsets:

Correct AnswerverifiedShow Answer

The unadjusted trial balance at the end of the year includes the following: The company uses the allowance method and has completed the aging schedule which indicates $5,800 of accounts are estimated uncollectible.What is the amount of bad debt expense to be recorded for the year?

Correct AnswerverifiedShow Answer

Total doubtful accounts at the end of the year are estimated to be $25,000 based on an aging of accounts receivable.If the balance in the Allowance for Doubtful Accounts is a $7,000 debit before adjustment,what will be the amount of bad debt expense recorded for the period?

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.The required entry(ies) on May 29 to record the recovery is:

Correct AnswerverifiedShow Answer

Using the allowance method,how would net income and the accounts receivable turnover ratio be affected when a customer's account balance,which is known to be uncollectible,is written off?

Correct AnswerverifiedShow Answer

The days-to-collect measure is calculated as:

Correct AnswerverifiedShow Answer

Which of the following statements regarding methods of accounting for bad debts is true?

Correct AnswerverifiedShow Answer

Extending credit to customers will not result in which of the following additional costs?

Correct AnswerverifiedShow Answer

A company has a debit balance of $3,500 in the Allowance for Doubtful Accounts.It estimates that 2% of net credit sales of $1,500,000 will be uncollectible.The required journal entry to record bad debt expense should include a debit to:

Correct AnswerverifiedShow Answer

Under the direct write-off method,the entry to write off a customer's account would be:

Correct AnswerverifiedShow Answer

The Grass is Greener Corporation is owed $11,890 from a client for landscaping.The account is overdue and the client is having difficulty paying.Why might the Grass is Greener Corporation extend a note receivable to the client?

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What was the total amount of cash collections from accounts receivable customers this year?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.The receivables turnover ratio for 2014 is closest to:

Correct AnswerverifiedShow Answer

Interest revenue from notes receivable is reported on a multiple step income statement as a part of Income from Operations.

Correct AnswerverifiedShow Answer

When a company routinely sells on credit,it is inevitable that some of its customers will not pay the amount owed.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What is the amount of Bad Debt Expense for 2015?

Correct AnswerverifiedShow Answer

Which of the following is true about interest receivable?

Correct AnswerverifiedShow Answer

If an uncollectible account,previously written off,is recovered:

Correct AnswerverifiedShow Answer

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