43. When $2,500 of accounts receivable are determined to be uncollectible, which of the
following should the company record to write off the accounts using the allowance method?
44. Using the allowance method, writing off an actual bad debts would include a:
45. At the beginning of 2012, the balance in Jackson Enterprises’ Allowance for Uncollectible
Accounts was $31,800. During 2012, the company wrote off $38,000 of accounts receivable.
Writing off the individual bad debts would include a:
46. A company collects an account receivable previously written off. Indicate how this
transaction would affect the following five financial statement items:
47. When using an aging method for estimating uncollectible accounts:
48. Crimson Inc. recorded credit sales of $750,000, of which $600,000 is not yet due,
$100,000 is past due for up to 180 days, and $50,000 is past due for more than 180 days.
Under the aging of receivables approach, Crimson Inc. expects it will not collect 1% of the
amount not yet due, 10% of the amount past due for up to 180 days, and 20% of the amount
past due for more than 180 days. The allowance account had a debit balance of $1,000 before
adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance
account?
49. During 2012, Bears Inc. recorded credit sales of $500,000. Before adjustments at year-
end, Bears has accounts receivable of $300,000, of which $50,000 is past due, and the
allowance account had a credit balance of $2,500. Using the aging of receivables approach,
what would be the adjustment assuming Bears expects it will not to collect 5% of the amount
50. The following information pertains to Lightning, Inc. at the end of December:
Lightning uses the aging method and estimates it will not collect 2% of accounts receivable
not yet due, 10% of receivables less than 30 days past due, and 40% of receivables greater
than 30 days past due. The accounts receivable balance of $7,000 consists of $3,500 not yet
due, $2,000 less than 30 days past due, and $1,500 greater than 30 days past due. What is the
appropriate amount of Bad Debt Expense?
51. On December 31, 2012, Andy Inc. has a debit balance of $1,500 for the Allowance for
Uncollectible Accounts before any year-end adjustment. Andy Inc. also has the following
information for its accounts receivable and the estimated percentages of bad debts for
different past-due amounts:
What is the amount of bad debt expense to be reported on Andy Inc.’s financial statements for
2012?
52. McConnell’s Bakeries had the following balances on December 31, 2012, before any
adjustment: Accounts Receivable = $100,000; Allowance for Uncollectible Accounts =
$4,100 (credit). McConnell’s estimates uncollectible accounts based on an aging of accounts
receivable as shown below:
What amount of bad debt expense did McConnell’s record in its December 31, 2012,
adjustment to the allowance account?
53. Under the direct write-off method, what adjustment is made at the end of the year to
account for possible future bad debts?
54. Under the direct write-off method, what adjustment is made at the time an actual bad debt
occurs?
55. Which accounting principle does the direct write-off method violate?
56. If the direct write-off method is used to account for uncollectible accounts, which of the
following statements is false?
57. Which method is not allowed under Generally Accepted Accounting Principles for the
purpose of accounting for uncollectible accounts?
58. The direct write-off method is generally not permitted for financial reporting purposes
because:
59. The primary difference between a note receivable and an account receivable is:
60. Hughes Aircraft sold a four-passenger airplane for $380,000, receiving a $50,000 down
payment and a 12% note for the balance. This transaction would include a:
61. On February 1, 2012, Middleton Corp. lends cash and accepts a $1,000 note receivable
that offers 12% interest and is due in six months. How much interest revenue will Middleton
Corp report during 2012?
62. On February 1, 2012, Sanger Corp. lends cash and accepts a $2,000 note receivable that
offers 10% interest and is due in six months. What would Sanger record on August 1, 2012,
when the borrower pays Sanger the correct amount owed?
63. On September 1, 2012, Middleton Corp. lends cash and accepts a $1,000 note receivable
that offers 12% interest and is due in six months. How much interest revenue will Middleton
Corp report during 2012?
64. On August 1, 2012, Turner Manufacturing lends cash and accepts a $6,000 note
receivable that offers 8% interest and is due in nine months. How would Turner record the
year-end adjustment to accrue interest in 2012?
65. On September 1, 2012, Middleton Corp. lends cash and accepts a $1,000 note receivable
that offers 12% interest and is due in six months. How much interest revenue will Middleton
Corp report during 2013?
66. 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
67. On January 1, 2012, Alice & Co. lends $5,000 to an employee and accepts a 24-month,
10% note. At the end of 2012, what effect will the adjustment for accrued interest revenue
have on the Alice & Co.’s financial statements?
68. Sandburg Veterinarian reports the following information for the year:
What is Sandburg’s receivables turnover ratio?
69. Beverage International reports net credit sales for the year of $240,000. The company’s
accounts receivable balance at the beginning of the year equaled $20,000 and the balance at
the end of the year equaled $30,000. What is Beverage International’s receivables turnover
ratio?
70. The amount of a company’s receivables is influenced by several variables, including all of
the following except:
71. Toppleson Manufacturing reports a receivables turnover ratio of 14.5. The industry
average is 10.7. What most likely is causing this difference?
72. At the beginning of the year, Vici Ventures had accounts receivable of $220,000. At the
end of the year, the company had accounts receivable of $340,000. During the year, Vici had
total sales of $1,000,000, 70% of which were credit sales What was Vici’s receivables
turnover ratio for the year?
73. The percentage-of-credit-sales method for estimating uncollectible accounts is sometimes
described as:
74. Which of the following statements is true with respect to the percentage-of-credit-sales
method for estimating uncollectible accounts?
75. The following information pertains to Lindsey Corp. at the at the end of the year:
Lindsey Corp. uses the percentage-of–credit-sales method and estimates that 2% of the credit
sales are uncollectible. After the year-end adjustment, what amount of bad debt expense
would Lindsey report for the year?
76. The following information pertains to Lightning, Inc. at the end of the year:
Lightning uses the percentage-of-credit-sales method and estimates 1% of sales are
uncollectible. What is the ending balance of the allowance account after the year-end
adjustment?
77. Credit sales transfer products and services to a customer today while bearing the risk of
collecting payment from that customer in the future.
78. At the time of a credit sale, a company would record an increase in assets and an increase
in revenues.
79. A sale on account is recorded as a debit to Service Revenue and a credit to Accounts
Receivable.
80. Accounts receivable represent the amount of cash owed to the company by its customers
from the sale of products or services on account.
81. Trade discounts represent a discount offered to the purchasers for quick payment.
82. When a company sells a $100 service with a 20% trade discount, $80 of revenue is
recognized.
83. A sales discount represents a reduction, not in the selling price of a product or service, but
in the amount to be paid by a credit customer if payment is made within a specified period of
time.
84. A sale on account for $1,000 offered with terms 2/10, n/30 means that the customers will
get a $2 discount if payment is made within 10 days; otherwise, full payment is due within 30
days.
85. The Sales Discounts account is an example of a contra revenue account.
86. The Sales Discounts account is an expense account.