Question 1

A debit balance in the Allowance for Doubtful Accounts

Accepted Answer

A)   is the normal balance for that account.
B)   indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.
C)   indicates that actual bad debt write-offs have been less than what was estimated.
D)   can only occur if an incorrect accounting entry was recorded.

Question 2

Under the allowance method, writing off an uncollectible account

Accepted Answer

A)   will increase profit.
B)   will decrease profit.
C)   will have no effect on total assets reported on the balance sheet.
D)   will increase and decrease profit.

Question 3

Under the allowance method, the net realizable value of receivables is the same both before and after an account has been written off.

Accepted Answer

A) True 
 B)False

Question 4

The accounts receivable turnover ratio measures how quickly a company collects its accounts receivable.

Accepted Answer

A) True 
 B)False

Question 5

Allowance for Doubtful Accounts on the balance sheet

Accepted Answer

A)   is offset against total current assets.
B)   increases the net realizable value of accounts receivable.
C)   appears under the heading "Current Liabilities."
D)   is offset against accounts receivable.

Question 6

Any interest accrued on a note receivable

Accepted Answer

A)   increases the net realizable value of the note receivable.
B)   is recorded separately as interest receivable.
C)   is recorded as a reduction of interest expense.
D)   requires a debit to Trade Accounts Receivable.

Question 7

The term "receivables" refers to

Accepted Answer

A)   amounts due from individuals or companies.
B)   merchandise to be collected from individuals or companies.
C)   cash to be paid to creditors.
D)   cash to be paid to debtors.

Question 8

As a general rule, the average collection period for accounts receivable should NOT exceed

Accepted Answer

A)   the inventory turnover period.
B)   the credit terms.
C)   one month.
D)   the average age of accounts receivable.

Question 9

Sales on bank credit cards are typically reported as cash sales.

Accepted Answer

A) True 
 B)False

Question 10

If a customer does NOT pay their account within 30 days, then interest charges will always be assessed on their account balance.

Accepted Answer

A) True 
 B)False

Question 11

If an account is collected after having been previously written off,

Accepted Answer

A)   the allowance account should be debited.
B)   Bad Debt Expense should be credited.
C)   the gross accounts receivable will remain unchanged.
D)   there will be both a debit and a credit to Accounts Receivable.

Question 12

Other receivables include non-trade receivables such as loans to company officers.

Accepted Answer

A) True 
 B)False

Question 13

The receivable that is usually evidenced by a formal instrument of credit is a(n)

Accepted Answer

A)   trade receivable.
B)   note receivable.
C)   accounts receivable.
D)   note payable.

Question 14

The two key parties to a promissory note are the

Accepted Answer

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

Question 15

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 bad and is written off.
C)   management estimates the amount of uncollectibles.
D)   a customer's account becomes past-due.

Question 16

Retailers often add a financing charge to a customer's accounts receivable balance

Accepted Answer

A)   if the customer fails to purchase additional merchandise.
B)   if the customer pays more than the required amount.
C)   if the account is not paid within a reasonable period of time.
D)   if the account is not paid within five days.

Question 17

A promissory note details all of the following EXCEPT

Accepted Answer

A)   the names of the parties.
B)   the amount of the loan.
C)   the interest rate.
D)   the purpose for which the funds were borrowed.

Question 18

When the allowance method of accounting for uncollectible accounts is used, 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 19

Under the allowance method, Bad Debts Expense is debited when an account is deemed uncollectible and must be written off.

Accepted Answer

A) True 
 B)False

Question 20

At December 31, 2017, Chambers Co. has gross accounts receivable of $127,000. There is a $10,000 credit balance in the allowance for doubtful accounts. Historically, bad debt expense has averaged 15% of accounts receivable. The allowance for doubtful accounts at December 31, 2017 is

Accepted Answer

A)   $10,000.
B)   $19,050.
C)   $1,500.
D)   $17,550.

Exam 8: Accounting for Receivables

Under the allowance method, Bad Debts Expense is debited when an account is deemed uncollectible and must be written off.

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The two key parties to a promissory note are the

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Other receivables include non-trade receivables such as loans to company officers.

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Allowance for Doubtful Accounts on the balance sheet

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

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A debit balance in the Allowance for Doubtful Accounts

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A promissory note details all of the following EXCEPT

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The term "receivables" refers to

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The receivable that is usually evidenced by a formal instrument of credit is a(n)

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At December 31, 2017, Chambers Co. has gross accounts receivable of $127,000. There is a $10,000 credit balance in the allowance for doubtful accounts. Historically, bad debt expense has averaged 15% of accounts receivable. The allowance for doubtful accounts at December 31, 2017 is

Correct AnswerverifiedShow Answer

Under the allowance method, writing off an uncollectible account

Correct AnswerverifiedShow Answer

If an account is collected after having been previously written off,

Correct AnswerverifiedShow Answer

As a general rule, the average collection period for accounts receivable should NOT exceed

Correct AnswerverifiedShow Answer

Retailers often add a financing charge to a customer's accounts receivable balance

Correct AnswerverifiedShow Answer

The accounts receivable turnover ratio measures how quickly a company collects its accounts receivable.

Correct AnswerverifiedShow Answer

Sales on bank credit cards are typically reported as cash sales.

Correct AnswerverifiedShow Answer

Under the allowance method, the net realizable value of receivables is the same both before and after an account has been written off.

Correct AnswerverifiedShow Answer

Any interest accrued on a note receivable

Correct AnswerverifiedShow Answer

When the allowance method of accounting for uncollectible accounts is used, bad debts expense is recorded

Correct AnswerverifiedShow Answer

If a customer does NOT pay their account within 30 days, then interest charges will always be assessed on their account balance.

Correct AnswerverifiedShow Answer

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