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The method for estimating bad debts under the allowance method that focuses on the balance sheet rather than the income statement is based on


A) a direct write-off.
B) an aging of the receivables.
C) credit sales.
D) net sales.

E) A) and B)
F) B) and D)

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A company uses the percentage of credit sales method to estimate bad debt expense.At the end of the year,the company's unadjusted trial balance includes the following: A company uses the percentage of credit sales method to estimate bad debt expense.At the end of the year,the company's unadjusted trial balance includes the following: The company estimates,based on historical bad debt losses,that 0.5% of the sales will be uncollectible.What is the bad debt expense to be recorded for the year? A) $4,500 B) $4,300 C) $4,700 D) $45,000 The company estimates,based on historical bad debt losses,that 0.5% of the sales will be uncollectible.What is the bad debt expense to be recorded for the year?


A) $4,500
B) $4,300
C) $4,700
D) $45,000

E) A) and D)
F) B) and C)

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The allowance method for uncollectible accounts is used for accounts receivable but not for notes receivable.

A) True
B) False

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The aging of accounts receivable method is based upon the principle that the longer an account is overdue,the higher the risk of nonpayment.

A) True
B) False

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Which of the following statements about extending credit is not true?


A) It is common for companies to sell on account to other companies.
B) Some companies extend credit to individual consumers.
C) Bad debts arise from credit sales to individual consumers,but not from credit sales to other companies.
D) When credit is available,customers often buy more products and services.

E) None of the above
F) A) and D)

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In the interest formula,the interest rate is on a(n) _____ basis;therefore,the time variable must reflect how many _____ out of _____ in the interest period.


A) monthly,months,6
B) annual,years,1
C) monthly,months,12
D) annual,months,12

E) A) and C)
F) B) and C)

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On December 1,2013,a company loaned a new employee $20,000 to assist with her relocation expenses.The employee signed a 6-month note,with interest of 9%.The company prepares year-end financial statements at December 31.What is the required adjusting entry at December 31 as a result of this note transaction? On December 1,2013,a company loaned a new employee $20,000 to assist with her relocation expenses.The employee signed a 6-month note,with interest of 9%.The company prepares year-end financial statements at December 31.What is the required adjusting entry at December 31 as a result of this note transaction? A) Option A B) Option B C) Option C D) Option D


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

E) All of the above
F) None of the above

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What is the amount due on the maturity date of a $5,000,3-month,10% note receivable?


A) $5,125
B) $5,500
C) $6,500
D) $5,000

E) A) and B)
F) A) and C)

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For each of the following transactions,indicate how each will affect the elements of the accounting equation by answering increase,decrease,or no effect. a.The company uses the direct write-off method and writes off specific receivables that have been identified as uncollectible. b.The company uses the allowance method and records the bad debts expense for the year. c.The company receives a 1-year promissory note from a customer in payment of his account because he needs additional time to pay. d.The company receives a payment from a customer on his account which had been previously written off as worthless. e.The company accrues interest earned on the note received in (c). For each of the following transactions,indicate how each will affect the elements of the accounting equation by answering increase,decrease,or no effect. a.The company uses the direct write-off method and writes off specific receivables that have been identified as uncollectible. b.The company uses the allowance method and records the bad debts expense for the year. c.The company receives a 1-year promissory note from a customer in payment of his account because he needs additional time to pay. d.The company receives a payment from a customer on his account which had been previously written off as worthless. e.The company accrues interest earned on the note received in (c).

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The potential disadvantages of extending credit include all of the following except which one?


A) Increased borrowing costs.
B) Customers buy too much.
C) The need for a collections department.
D) More staff hours spent in the accounting department.

E) A) and B)
F) None of the above

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Dry Corporation cannot pay off its account with Bone Corporation on a timely basis.Bone Corporation issues a $2,000,3-month,12% promissory note to Dry Corporation in settlement of an open accounts receivable.What entry will Bone Corporation make upon issuance? Dry Corporation cannot pay off its account with Bone Corporation on a timely basis.Bone Corporation issues a $2,000,3-month,12% promissory note to Dry Corporation in settlement of an open accounts receivable.What entry will Bone Corporation make upon issuance? A) Option A B) Option B C) Option C D) Option D


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

E) B) and D)
F) None of the above

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The Grass is Greener Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be collected.To record the potential bad debts,The Grass is Greener Corporation would:


A) debit Accounts Receivable and credit Allowance for Doubtful Accounts for $120.
B) debit Allowance for Doubtful Accounts and credit Bad Debt Expense for $120.
C) debit Bad Debt Expense and credit Allowance for Doubtful Accounts for $120.
D) debit Bad Debt Expense and credit Accounts Receivable for $120.

E) A) and C)
F) A) and D)

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A company used the aging of accounts receivable method and at December 31 determined that the net realizable value of accounts receivable was $304,000.In addition,the records show the following: A company used the aging of accounts receivable method and at December 31 determined that the net realizable value of accounts receivable was $304,000.In addition,the records show the following: What was the amount of Bad Debt Expense for the year? A) $96,000 B) $64,000 C) $80,000 D) $16,000 What was the amount of Bad Debt Expense for the year?


A) $96,000
B) $64,000
C) $80,000
D) $16,000

E) A) and B)
F) A) and C)

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On January 31,2014,Purrfect Pets receives a $4,680 interest payment on a note receivable representing two months of accumulated interest.One month of this interest was accrued and recorded during the year ended December 31,2013.Upon receiving the payment,the company would:


A) debit Interest Receivable for $2,340,debit Cash $2,340,and credit Interest Revenue for $4,680.
B) debit Cash for $4,680,credit Interest Revenue for $2,340,and credit Interest Receivable for $2,340.
C) debit Cash for $4,680,and credit Interest Receivable for $4,680.
D) debit Cash for $4,680 and credit Interest Revenue for $4,680.

E) None of the above
F) All of the above

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IBM signs an agreement to lend one of its customers $200,000 to be repaid in one year at 5.5% interest.IBM would record this loan as:


A) notes payable.
B) accounts receivable.
C) notes receivable.
D) unearned revenue.

E) None of the above
F) B) and C)

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The direct write-off method for uncollectible accounts is not allowed by GAAP because it ignores the conservatism concept and the matching principle.

A) True
B) False

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Use the information above to answer the following question.In January 2015,the company writes off a $500 account which it determines is uncollectible.If the company uses the allowance method,which of the following is true?


A) The write-off will decrease the current assets by $500.
B) The write-off will decrease net income for 2015 by $100.
C) The write-off will decrease net accounts receivable by $100.
D) The write-off will not increase the expenses for 2015.

E) C) and D)
F) B) and D)

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A company performed an aging of accounts receivable on December 31 and gathered the following information: A company performed an aging of accounts receivable on December 31 and gathered the following information: What is the net realizable value of accounts receivable to be reported on the balance sheet at December 31? A) $505,000 B) $496,000 C) $467,000 D) $516,000 What is the net realizable value of accounts receivable to be reported on the balance sheet at December 31?


A) $505,000
B) $496,000
C) $467,000
D) $516,000

E) C) and D)
F) None of the above

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In normal circumstances,the allowance for doubtful accounts for a company should be a fairly consistent percentage of gross accounts receivable.

A) True
B) False

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Use the information above to answer the following question.If Johnstone Supplies,Inc. ,writes off $3,081 of uncollectible accounts during August,2014,the unadjusted account balance in the allowance for doubtful accounts on August 31,2014 will be:


A) $30,931.
B) $5,065.
C) $34,012.
D) $1,984.

E) B) and C)
F) A) and C)

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Showing 21 - 40 of 146

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