Chapter 08 – Receivables
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Page 31
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–04 – LO: 08–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.12 – Receivables Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:23 PM
DATE MODIFIED:
10/16/2017 5:23 PM
77. The collection of an account that had been previously written off under the allowance method of accounting for
uncollectibles
a.
will increase net income in the period it is collected
b.
will decrease net income in the period it is collected
c.
does not affect net income in the period it is collected
d.
requires a correcting entry for the period in which the account was written off
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–04 – LO: 08–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.12 – Receivables Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:23 PM
DATE MODIFIED:
10/16/2017 5:23 PM
78. Allowance for Doubtful Accounts has a credit balance of $2,100 at the end of the year (before adjustment), and an
analysis of customers’ accounts indicates uncollectible receivables of $19,700. Which of the following entries records the
proper adjustment for bad debt expense?
a.
debit Allowance for Doubtful Accounts, $17,600; credit Bad Debt Expense, $17,600
b.
debit Allowance for Doubtful Accounts, $21,800; credit Bad Debt Expense, $21,800
c.
debit Bad Debt Expense, $21,800; credit Allowance for Doubtful Accounts, $21,800
d.
debit Bad Debt Expense, $17,600; credit Allowance for Doubtful Accounts, $17,600
ANSWER:
d
RATIONALE:
Bad debt expense = Uncollectible accounts estimate − Unadjusted allowance for
doubtful accounts = $19,700 − $2,100 = $17,600
Bad Debt Expense 17,600
Allowance for Doubtful Accounts 17,600
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
Chapter 08 – Receivables
Copyright Cengage Learning. Powered by Cognero.
Page 36
b.
percentage of sales method
c.
analysis of receivables method
d.
both percentage of sales and analysis of receivables methods
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–04 – LO: 08–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.12 – Receivables Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:23 PM
DATE MODIFIED:
10/16/2017 5:23 PM
88. Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of
credit sales will be uncollectible. On January 1, the Allowance for Doubtful Accounts had a credit balance of
$2,400. During the year, Abbott wrote off accounts receivable totaling $1,800 and made credit sales of $100,000. After
the adjusting entry, the December 31 balance in Bad Debt Expense will be
a.
$1,200
b.
$3,000
c.
$3,600
d.
$7,200
ANSWER:
b
RATIONALE:
Bad Debt Expense = Credit Sales × Bad Debt as a Percent of Credit Sales = $100,000
× 0.03 = $3,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–04 – LO: 08–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.12 – Receivables Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:23 PM
DATE MODIFIED:
10/16/2017 5:23 PM
89. A company uses the allowance method to account for uncollectible accounts receivable. When the firm writes off a
specific customer’s account receivable
a.
total current assets are reduced
b.
total expenses for the period are increased
c.
net realizable value of accounts receivable increases
d.
there is no effect on total current assets or total expenses
ANSWER:
d
