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8) An example of good internal control over Accounts Receivable is:
A) the employee who handles the daily cash receipts also records Accounts Receivable
transactions.
B) the employee who opens the mail is also in charge of recording Accounts Receivable.
C) there are separate employees for cash-handling and cash-accounting duties.
D) All of the above are examples of good internal controls.
Question Type: Application
9) Which is NOT a benefit to extending credit to customers?
A) Bad debt expenses
B) Increased revenues
C) Increased profits
D) Wider range of customers
Question Type: Concept
10) A cost incurred by the seller when credit customers do not pay is called:
A) a write down.
B) bad debt expense.
C) accounts deceivable.
D) an unallowable account.
Question Type: Concept
7.4 Use the direct write-off and allowance methods to account for uncollectible accounts
1) The simplest way to account for an uncollectible account is to use the allowance method.
Question Type: Concept
2) When writing off an account using the direct write-off method, the journal entry would
include a debit to Bad Debt Expense.
Question Type: Application
3) GAAP generally allows the direct write-off method for accounting for bad debts.
Question Type: Concept
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4) The direct write-off method always adheres to the matching principle.
Question Type: Concept
5) The materiality principle allows companies with low amounts of uncollectible accounts to use
the direct write-off method.
Question Type: Concept
6) The allowance method of accounting for bad debts is required by GAAP because of the
materiality principle.
Question Type: Concept
7) The contra-account, Allowance for Doubtful Accounts, is credited when journal entries are
made for estimates of bad debts.
Question Type: Application
8) The percent of sales method is the only method allowed by GAAP to estimate the amount of
uncollectible accounts.
Question Type: Concept
9) The net realizable value of Accounts Receivable is computed by subtracting the allowance for
doubtful accounts from the amount in the Accounts Receivable control account.
Question Type: Application
10) When using the aging method, the amount calculated to be the uncollectible accounts is
always the amount used for the adjusting entry at the end of the period.
Question Type: Application
11) There are two methods for accounting for uncollectible receivables.
Question Type: Concept
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12) Receivables of a company CANNOT be long-term assets.
Question Type: Concept
13) When a customer fails to pay on their account, it creates a(n):
A) note receivable.
B) uncollectible account.
C) account receivable.
D) decrease in revenue.
Question Type: Concept
14) What type of account is Allowance for Doubtful Accounts?
A) A contra-asset account
B) An expense account
C) A contra-liability account
D) A revenue account
Question Type: Concept
15) Which of the following is TRUE?
A) The allowance method requires a business to estimate bad debt expense.
B) The allowance method requires a business to record only actual bad debt expense.
C) The allowance method allows a business to choose between recording actual or estimated bad
debt expense.
D) The allowance method does not relate to bad debts expense. It is a method used to prepare a
bank reconciliation.
Question Type: Concept
16) Once an Account Receivable is written off, can a business ever collect that money?
A) No, GAAP does not allow a company to collect any amounts from a customer who has had an
account written off.
B) Only when using the direct write-off method can a company collect from a customer who has
had an account written off.
C) Only when using the allowance method can a company collect from a customer who has had
an account written off.
D) Both the allowance and direct write-off methods permit a company to collect from a customer
who has had an account written off.
Question Type: Concept
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17) The end of period adjusting entry for bad debt expense under the direct write-off method is:
A) Bad Debt Expense, debit; Allowance for Uncollectible Accounts, credit.
B) not required.
C) Cash, debit; Accounts Receivable/customer name, credit.
D) Bad Debt Expense, debit; Accounts Receivable/customer name, credit.
Question Type: Application
18) The journal entry to write off a customer‘s account under the direct write-off method is:
A) Bad Debt Expense, debit; Allowance for Uncollectible Accounts, credit.
B) not required.
C) Cash, debit; Accounts Receivable/customer name, credit.
D) Bad Debt Expense, debit; Accounts Receivable/customer name, credit.
Question Type: Application
19) Under the direct write-off method, to record the receipt of cash after an account has
previously been written off, you would first:
A) debit Cash and credit the customer‘s account.
B) reinstate the customer‘s account.
C) debit Allowance for Doubtful Accounts.
D) debit Bad Debt Expense.
Question Type: Application
20) The end of period adjusting entry for bad debt expense under the allowance method is:
A) Bad Debt Expense, debit; Allowance for Uncollectible Accounts, credit.
B) not required.
C) Cash, debit; Accounts Receivable/customer name, credit.
D) Bad Debt Expense, debit; Accounts Receivable/customer name, credit.
Question Type: Application
21) The journal entry to write off a customer‘s account under the allowance method is:
A) Bad Debt Expense, debit; Allowance for Uncollectible Accounts, credit.
B) not required.
C) Allowance for Uncollectible Accounts, debit; Accounts Receivable/customer name, credit.
D) Bad Debt Expense, debit; Accounts Receivable/customer name, credit.
Question Type: Application
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22) Under the allowance method, to record the receipt of cash after an account has previously
being written off, you would first:
A) debit Cash and credit the customer‘s account.
B) reinstate the customer‘s account.
C) debit Allowance for Doubtful Accounts.
D) debit Bad Debt Expense.
Question Type: Application
23) A company has $275,000 in credit sales. The company uses the allowance method to account
for uncollectible accounts. The Allowance for Doubtful Accounts now has a $7,550 credit
balance. If the company estimates 5% of credit sales will be uncollectible, what will be the
amount of the journal entry to record estimated uncollectible accounts?
A) $13,750
B) $7,550
C) $21,300
D) $6,200
Question Type: Application
24) A company has $321,000 in credit sales. The company uses the allowance method to account
for uncollectible accounts. The Allowance for Doubtful Accounts now has an $8,150 debit
balance. If the company estimates 5% of credit sales will be uncollectible, what will be the
amount of the journal entry to record estimated uncollectible accounts?
A) $8,150
B) $24,200
C) $7,900
D) $16,050
Question Type: Application
25) A company has $294,000 in credit sales. The company uses the allowance method to account
for uncollectible accounts. The Allowance for Doubtful Accounts now has a $2,210 credit
balance. If the company estimates that $7,640 of accounts will be uncollectible based on an
aging of Accounts Receivable, what will be the amount of the journal entry to record estimated
uncollectible accounts?
A) $2,210
B) $9,850
C) $7,640
D) $5,430
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26) A company has $316,000 in credit sales. The company uses the allowance method to account
for uncollectible accounts. The Allowance for Doubtful Accounts now has a $1,896 debit
balance. If the company estimates that $8,160 of accounts will be uncollectible based on an
aging of Accounts Receivable, what will be the amount of the journal entry to record estimated
uncollectible accounts?
A) $8,160
B) $6,264
C) $10,056
D) $1,896
Question Type: Application
27) Marla is a customer of Smiths, Inc. Her current balance due is $2,430. It has been determined
that she defaulted on her account. If the company uses the direct write–off method, what entry is
necessary to write off the $2,430?
A) No entry will be necessary.
B) Debit Accounts Receivable/Marla; credit Bad Debt Expense.
C) Debit Bad Debt Expense; credit Accounts Receivable/Marla.
D) Debit Bad Debt Expense; credit Allowance for Doubtful Accounts.
Question Type: Application
28) Joe is a customer of Bobble, Inc. which uses the allowance method to account for
uncollectible accounts. The company wrote off his account of $2,000 on March 15. On June 11,
he sent in a payment of $800. What will Bobble, Inc. record first to reinstate his account?
A) Debit Cash; credit Accounts Receivable/Joe.
B) Debit Bad Debt Expense; credit Accounts Receivable/Joe.
C) Debit Allowance for Doubtful Accounts; credit Accounts Receivable/Joe.
D) Debit Accounts Receivable/Joe; credit Allowance for Doubtful Accounts.
Question Type: Application
29) Piper, Inc. had credit sales for the period of $85,000. The balance in Allowance for Doubtful
Accounts is a debit of $827. How much will the credit be to Allowance for Doubtful Accounts if
Piper uses the percent of credit sales method of estimating uncollectible accounts and they
estimate that 2% of credit sales will be uncollectible?
A) $873
B) $827
C) $2,527
D) $1,700
Question Type: Application
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30) Piper, Inc. had credit sales for the period of $85,000. The balance in Allowance for Doubtful
Accounts is a debit of $857. What is the credit to Allowance for Doubtful Accounts if Piper uses
the aging method to estimate uncollectible accounts and an aging of Accounts Receivable
reflected an estimated amount of uncollectible accounts of $6,382?
A) $7,239
B) $5,525
C) $6,382
D) $857
Question Type: Application
31) Charmed, Inc. had credit sales for the period of $144,000. The balance in Allowance for
Doubtful Accounts is a debit of $653. If Charmed estimates that 3% of credit sales will be
uncollectible, what is the required journal entry to record estimated uncollectible accounts?
A) Debit Bad Debt Expense, $4,320; credit Allowance for Uncollectible Accounts, $4,320.
B) No entry is required.
C) Debit Bad Debt Expense, $4,973; credit Allowance for Uncollectible Accounts, $4,973.
D) Debit Bad Debt Expense, $3,667; credit Allowance for Uncollectible Accounts, $3,667.
Question Type: Application
32) Charmed, Inc. had credit sales for the period of $142,000. The balance in Allowance for
Doubtful Accounts is a debit of $643. If Charmed ages Accounts Receivable and determines
estimated uncollectible accounts to be $2,860, what is the required journal entry to record
estimated uncollectible accounts?
A) Debit Bad Debt Expense, $2,860; credit Allowance for Uncollectible Accounts, $2,860.
B) No entry is required.
C) Debit Bad Debt Expense, $3,503; credit Allowance for Uncollectible Accounts, $3,503.
D) Debit Bad Debt Expense, $2,217; credit Allowance for Uncollectible Accounts, $2,217.
Question Type: Application
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33) Robbins Company has given you the following information from its aging of Accounts
Receivable. Using this information, determine the amount of the journal entry to record the
estimated uncollectible accounts.
Current
$24,800
1% uncollectible
31-60 days
7,100
9% uncollectible
61-90 days
4,000
19% uncollectible
91 and up
1,900
34% uncollectible
The current balance in Allowance for Doubtful Accounts is a $938 credit.
A) $3,231
B) $2,293
C) $1,355
D) $938
34) Capital Masonry has given you the following information from its aging of Accounts
Receivable. Using this information, determine the amount of the journal entry to record the
estimated uncollectible accounts.
Current
$22,300
2% uncollectible
31-60 days
5,300
6% uncollectible
61-90 days
2,300
15% uncollectible
91 and up
1,200
19% uncollectible
The current balance in Allowance for Doubtful Accounts is a $145 debit.
A) $1,337
B) $1,482
C) $145
D) $1,192
Question Type: Application
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35) Cypress Co. has given you the following information from its aging of Accounts Receivable.
Using this information, determine the amount of the journal entry to record the estimated
uncollectible accounts.
Current
$23,000
3% uncollectible
31-60 days
5,200
6% uncollectible
61-90 days
2,500
10% uncollectible
91 and up
2,000
18% uncollectible
The current balance in Allowance for Doubtful Accounts is a $144 debit.
A) $1,468
B) $1,612
C) $1,756
D) $69,000
Question Type: Application
36) Thames, Inc. has given you the following information from its aging of Accounts
Receivable. Using this information, determine the amount of the journal entry to record the
estimated uncollectible accounts.
Current
$19,000
4% uncollectible
31-60 days
3,200
6% uncollectible
61-90 days
2,900
10% uncollectible
91 and up
2,000
16% uncollectible
The current balance in Allowance for Doubtful Accounts is a $160 credit.
A) $1,402
B) $1,562
C) $1,722
D) None of the above
Question Type: Application
37) When using the allowance method for uncollectible accounts, the percent–of-sales method is
called the:
A) Balance Sheet approach.
B) Income Statement approach.
C) allowance approach.
D) direct write-off approach.
Question Type: Concept
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38) When using the allowance method for uncollectible accounts, the aging method is called the:
A) Balance Sheet approach.
B) Income Statement approach.
C) allowance approach.
D) direct write-off approach.
Question Type: Concept
7.5 Report accounts receivable on the balance sheet
1) Accounts Receivable are reported at current market value in the Current Assets sections of the
Balance Sheet.
Question Type: Concept
2) Accounts Receivable may be reported net of Allowance for Doubtful Accounts.
Question Type: Concept
3) Accounts Receivable should be reported at ________ in the ________ section of a company’s
Balance Sheet.
A) Market value; Long-Term Assets
B) Net realizable value; Long-Term Assets
C) Net realizable value; Current Assets
D) Market value; Current Assets
Question Type: Concept
4) How are net realizable receivables calculated?
A) Accounts Receivable plus the Allowance for Doubtful Accounts
B) Allowance for Doubtful Accounts plus NSF checks
C) Accounts Receivable less the Allowance for Doubtful Accounts
D) Accounts Receivable divided by the Allowance for Doubtful Accounts
Question Type: Application