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Exam 5: Receivables and Sales

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Question 91

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Under the allowance method, when a company writes off an account receivable as an actual bad debt, it reduces total assets.

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Question 92

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On December 31, 2012, Larry's Used Cars had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $53,600 and $1,325, respectively. During 2013, Larry's wrote off $1,465 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,280 at December 31, 2013. Bad debt expense for 2013 would be:

A) $1,280.
B) $1,465.
C) $1,420.
D) $1,140.

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Question 93

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Barton Health Services provided care to a patient worth $1,200. Because the patient was over the age of 65, Barton granted the patient a 20% discount and the customer paid the correct amount in cash. How would Barton record the service transaction?

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ Recognizes bad debts when accounts become uncollectible.

A company reports the following amounts at the end of the year (before any year-end adjustment). Record the adjustment for uncollectible accounts (1) using the percentage-of-receivables method, assuming the company estimates 10% of receivables will not be collected, and (2) using the percentage-of-credit-sales method, assuming the company estimates 2% of credit sales will not be collected.

Under the allowance method, when a company collects cash from an account previously written off, total assets increase.

The aging method for estimating uncollectible accounts considers that a higher percentage of "older" accounts will not be collected compared to "newer" accounts.

At the end of the year, a company has a balance in Allowance for Uncollectible Accounts of $2,000 (debit) before any year-end adjustment. The balance of Accounts Receivable is $180,000. The company estimates that 5% of accounts receivable will not be collected over the next year. Record the adjustment for uncollectible accounts.

A debit balance in the Allowance for Uncollectible Accounts before adjustment indicates that last year's estimate of uncollectible accounts was too low.

Two important ratios that help in understanding the company's effectiveness in managing receivables are the receivables turnover ratio and the average collection period.

Credits sales are recorded as:

Notes receivable are assets and are reported in the balance sheet.

If a company is owed $10,000 by its customers, but it expects that $1,000 will not be collected, accounts receivable in the balance sheet are reported at the net amount of $9,000.

During 2012, its first year of operations, a company provides services on account of $250,000. By the end of 2012, cash collections on these accounts total $130,000. The company estimates that 10% of accounts receivable will be uncollectible. Record the adjustment for uncollectible accounts on December 31, 2012.

Which of the following best describes credit sales?

On July 1, 2012, Herzog Mining lends cash and accepts a $9,000 note receivable that offers 10% interest and is due in nine months. How would Herzog record the transaction on April 1, 2013, when the borrower pays Herzog the correct amount owed?

Collections of accounts receivable that previously have been written off are credited to:

The direct write-off method is generally not permitted for financial reporting purposes because:

A company's adjustment for uncollectible accounts at year-end would include a:

Trade discounts represent a discount offered to the purchasers for quick payment.