Chapter 08 – Receivables
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Page 51
b.
$30,500 and $525,000
c.
$19,500 and $525,000
d.
$30,500 and $25,000
ANSWER:
a
RATIONALE:
Bad debt expense = Uncollectible accounts estimate − Unadjusted allowance for
doubtful accounts = $25,000 − $5,500 = $19,500
Allowance for doubtful accounts = Unadjusted allowance for doubtful accounts + Bad
debt expense = $5,500 + $19,500 = $25,000
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
121. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts
has a credit balance of $5,500; and sales for the year total $2,500,000. An analysis of receivables estimates uncollectible
receivables as $25,000.
Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting
entry for bad debt expense and the adjusted balance of Allowance for Doubtful Accounts.)
a.
$550,000
b.
$544,500
c.
$525,000
d.
$575,000
ANSWER:
c
RATIONALE:
Bad debt expense = Uncollectible accounts estimate − Unadjusted allowance for
doubtful accounts = $25,000 − $5,500 = $19,500
Adjusted allowance for doubtful accounts = Unadjusted allowance for doubtful
accounts + Bad debt expense = $5,500 + $19,500 = $25,000
Net realizable value of accounts receivable = Accounts receivables − Allowance for
doubtful accounts = $550,000 − $25,000 = $525,000
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
Matching
False
ANSWER:
a
POINTS:
1
134. When using this method, estimated bad debts are added to the existing allowance balance.
ANSWER:
POINTS:
1
135. This method is most often used by small companies with few receivables.
ANSWER:
a
POINTS:
1
POINTS:
1
ANSWER:
b
POINTS:
1
131. All money claims against other entities
ANSWER:
e
POINTS:
1
132. Measures how frequently during the year accounts receivable are being turned into cash
ANSWER:
a
POINTS:
1
Chapter 08 – Receivables
Matching
False
FNMN.WAJO.19.08–06 – LO: 08–06
141. A formal, written instrument of credit that represents amounts due from customers
ANSWER:
g
POINTS:
1
ANSWER:
d
POINTS:
1
ANSWER:
c
POINTS:
1
ANSWER:
h
POINTS:
1
ANSWER:
d
POINTS:
1
139. With this method, there is no allowance account.
ANSWER:
a
POINTS:
1
140. This method focuses on the income statement.
ANSWER:
c
POINTS:
1
classified as investments.
POINTS:
1
Moderate
Bloom’s: Understanding
145. A note that is not paid when it is due
ANSWER:
e
POINTS:
1
146. The dollar amount stated on a promissory note
ANSWER:
a
POINTS:
1
147. The party promising to pay a note
ANSWER:
f
POINTS:
1
148. The time between the date a note is issued and the due date of the note
ANSWER:
b
POINTS:
1
149. Other than Accounts Receivable and Notes Receivable, name other receivables that might be included in the general
ledger.
ANSWER:
Interest Receivable, Receivables from Officers or Employees, Taxes Receivable
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Understanding
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–01 – LO: 08–01
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
150. Discuss the similarities and differences between accounts receivable, notes receivable, and other receivables.
ANSWER:
Accounts receivable result from the sale of goods and services on credit. They are
normally collected within a short period of time (30–60 days) and are classified as
current assets on the balance sheet.
Notes receivable can also result from the sale of goods, generally when the amount
owed is due in more than 60 days. Notes can also be used to settle accounts
receivable. Notes are formal written instruments of credit. When collection is
expected to be in less than one year, they are classified as current assets on the balance
sheet.
POINTS:
1
Easy
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–03 – LO: 08–03
153. Journalize the following transactions using the direct write-off method of accounting for uncollectible receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of goods sold is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.
ANSWER:
April 1
Accounts Receivable
7,200
Sales
7,200
1
Cost of Goods Sold
5,400
Inventory
5,400
June 10
Cash
2,400
Bad Debt Expense
4,800
Accounts Receivable—Jim Dobbs
7,200
Oct. 11
Accounts Receivable—Jim Dobbs
4,800
Bad Debt Expense
4,800
11
Cash
4,800
Accounts Receivable—Jim Dobbs
4,800
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.08–03 – LO: 08–03
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
154. Roe’s Renovations utilizes the direct write-off method of accounting for uncollectible receivables. On September 15
the company is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is expected in the
liquidation. Write off the $675 of accounts receivable due from Jacob Marley.
ANSWER:
Sept. 15 Bad Debt Expense 675
