81
201) The account to credit when estimating future bad debts.
Difficulty: 3 Hard
Topic: Allowance Method – Establishing the Allowance
Learning Objective: 05-04 Establish an allowance for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
202) The effect on total expenses when estimating future bad debts.
Difficulty: 3 Hard
Topic: Allowance Method – Establishing the Allowance
Learning Objective: 05-04 Establish an allowance for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
203) The account to debit when estimating future bad debts.
Difficulty: 3 Hard
Topic: Allowance Method – Establishing the Allowance
Learning Objective: 05-04 Establish an allowance for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
204) The effect on total liabilities when estimating future bad debts.
Difficulty: 3 Hard
Topic: Allowance Method – Establishing the Allowance
Learning Objective: 05-04 Establish an allowance for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
82
Match each term related to the comparison between the allowance method and direct write-off
method for uncollectible accounts with its description.
A) Direct write-off method
B) Allowance method
C) Bad debt expense
D) No effect
E) Allowance for Uncollectible Accounts
F) Decrease
G) Increase
H) Accounts receivable
205) The procedure commonly used for financial reporting purposes to account for uncollectible
accounts.
Difficulty: 3 Hard
Topic: Allowance Method – Writing Off Accounts Receivable; Direct Write-Off Method
Learning Objective: 5-04 Write off accounts receivable as uncollectible.; 05-06 Contrast the
allowance method and direct write-off method when accounting for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
206) The procedure commonly used for tax reporting purposes to account for uncollectible
accounts.
Difficulty: 3 Hard
Topic: Allowance Method – Writing Off Accounts Receivable; Direct Write-Off Method
Learning Objective: 05-04 Write off accounts receivable as uncollectible.; 05-06 Contrast the
allowance method and direct write-off method when accounting for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
207) The account to credit when writing off an actual bad debt under the allowance method.
Difficulty: 3 Hard
Topic: Allowance Method – Writing Off Accounts Receivable; Direct Write-Off Method
Learning Objective: 05-04 Write off accounts receivable as uncollectible.; 05-06 Contrast the
allowance method and direct write-off method when accounting for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
83
208) The account to debit when writing off an actual bad debt under the direct write-off method.
Difficulty: 3 Hard
Topic: Allowance Method – Writing Off Accounts Receivable; Direct Write-Off Method
Learning Objective: 05-04 Write off accounts receivable as uncollectible.; 05-06 Contrast the
allowance method and direct write-off method when accounting for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
209) The account to debit when writing off an actual bad debt under the allowance method.
Difficulty: 3 Hard
Topic: Allowance Method – Writing Off Accounts Receivable; Direct Write-Off Method
Learning Objective: 05-04 Write off accounts receivable as uncollectible.; 05-06 Contrast the
allowance method and direct write-off method when accounting for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
210) The effect on total expenses when writing off an actual bad debt under the direct write-off
method.
Difficulty: 3 Hard
Topic: Allowance Method – Writing Off Accounts Receivable; Direct Write-Off Method
Learning Objective: 05-04 Write off accounts receivable as uncollectible.; 05-06 Contrast the
allowance method and direct write-off method when accounting for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
211) The effect on total assets when estimating future bad debts under the allowance method.
Difficulty: 3 Hard
Topic: Allowance Method – Writing Off Accounts Receivable; Direct Write-Off Method
Learning Objective: 05-04 Write off accounts receivable as uncollectible.; 05-06 Contrast the
allowance method and direct write-off method when accounting for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
212) The effect on total expenses when estimating future bad debts under the direct write-off
method.
Difficulty: 3 Hard
Topic: Allowance Method – Writing Off Accounts Receivable; Direct Write-Off Method
Learning Objective: 05-04 Write off accounts receivable as uncollectible.; 05-06 Contrast the
allowance method and direct write-off method when accounting for uncollectible accounts.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
84
Match each account with its description.
A) Cash
B) Interest receivable
C) Notes receivable
D) Accounts receivable
E) Interest revenue
213) Informal credit arrangements with trade customers.
Difficulty: 2 Medium
Topic: Accounting for Notes Receivable
Learning Objective: 05-07 Account for notes receivable and interest revenue.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
214) Account to debit when interest accrues at the end of the year.
Difficulty: 2 Medium
Topic: Accounting for Notes Receivable
Learning Objective: 05-07 Account for notes receivable and interest revenue.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
215) Account to credit when interest accrues at the end of the year.
Difficulty: 2 Medium
Topic: Accounting for Notes Receivable
Learning Objective: 05-07 Account for notes receivable and interest revenue.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
216) Formal signed credit arrangements between a creditor and a debtor.
Difficulty: 2 Medium
Topic: Accounting for Notes Receivable
Learning Objective: 05-07 Account for notes receivable and interest revenue.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
85
217) Account to debit when receivables and interest are collected.
Difficulty: 2 Medium
Topic: Accounting for Notes Receivable
Learning Objective: 05-07 Account for notes receivable and interest revenue.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking
86
Match each term related to receivables analysis with its description.
A) Increase
B) Decrease
C) Receivables turnover ratio
D) More
E) Average collection period
F) Less
218) The approximate number of days the average accounts receivable balance is outstanding.
Difficulty: 3 Hard
Topic: Analysis – Receivables Turnover Ratio; Analysis – Average Collection Period
Learning Objective: 05-08 Calculate key ratios investors use to monitor a company’s
effectiveness in managing receivables.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
219) An increase in the receivables turnover ratio generally indicates the company manages its
receivables ________ efficiently.
Difficulty: 3 Hard
Topic: Analysis – Receivables Turnover Ratio; Analysis – Average Collection Period
Learning Objective: 05-08 Calculate key ratios investors use to monitor a company’s
effectiveness in managing receivables.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
220) Reducing the length of time in which customers are required to pay will typically ________
the receivables turnover ratio.
Difficulty: 3 Hard
Topic: Analysis – Receivables Turnover Ratio; Analysis – Average Collection Period
Learning Objective: 05-08 Calculate key ratios investors use to monitor a company’s
effectiveness in managing receivables.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
221) The number of times during a year that the average accounts receivable balance is collected.
Difficulty: 3 Hard
Topic: Analysis – Receivables Turnover Ratio; Analysis – Average Collection Period
Learning Objective: 05-08 Calculate key ratios investors use to monitor a company’s
effectiveness in managing receivables.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
222) An increase in the average collection period indicates the company manages its receivables
________ efficiently.
Difficulty: 3 Hard
Topic: Analysis – Receivables Turnover Ratio; Analysis – Average Collection Period
Learning Objective: 05-08 Calculate key ratios investors use to monitor a company’s
effectiveness in managing receivables.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
223) Allowing riskier customers to purchase goods or services on account will typically ________
the receivables turnover ratio.
Difficulty: 3 Hard
Topic: Analysis – Receivables Turnover Ratio; Analysis – Average Collection Period
Learning Objective: 05-08 Calculate key ratios investors use to monitor a company’s
effectiveness in managing receivables.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA/Accessibility: BB Critical Thinking
224) A company offers a 20% trade discount when providing services of $5,000 or more to its
customers. Record the transaction when the company provides services of $8,000 (not including
the trade discount) on account.
225) On February 23, a company provides services on account to a customer for $4,500. The
customer pays in full for those services on March 4. Record the transactions for the company when
the services are provided on February 23 and when the cash is collected on March 4.
226) Suppose Casey Title Company normally charges $500 for services related to selling a house.
As part of a summer special, Casey offers customers a trade discount of 20%. On July 9, Linda
Holmes uses the services of Casey and pays cash equal to the discounted price. Record the revenue
recognized by Casey on July 9.
227) On September 8, a company provides services on account to a customer for $1,500, terms
2/10, n/30. The customer pays for those services on September 15. Record the transactions for the
company when the services are provided on September 8 and when the cash is collected on
September 15.
228) On October 22, a company provides services on account to a customer for $1,800, terms 3/15,
n/30. The customer pays for those services on December 19. Record the transactions for the
company when the services are provided on October 22 and when cash is collected on December
19.
229) On August 12, a company provides services on account to a customer for $3,000. However,
on August 16, the customer is not completely satisfied with the service and the company grants an
allowance on the amount owed of $400. On August 20, the customer makes full payment of the
balance owed, excluding the allowance. Record the services provided on August 12, the sales
allowance on August 16, and the cash collection on August 20.
230) A company reports the following amounts at the end of the year: Total sales revenue =
$500,000; sales discounts = $10,000; sales returns = $30,000; sales allowances = $20,000.
Compute net revenues.
231) A company reports the following amounts at the end of the year: Total sales revenue =
$400,000; cash = $35,000; sales discounts = $10,000; accounts receivable = $20,000; sales returns
= $15,000; operating expenses = $70,000; sales allowances = $25,000. Compute net revenues.
232) During 2021, its first year of operations, a company ends the year with accounts receivable of
$100,000. The company estimates that 20% of accounts receivable will be uncollectible. Record
the adjustment for uncollectible accounts on December 31, 2021.
233) During 2021, its first year of operations, a company provides services on account of
$250,000. By the end of 2021, cash collections on these accounts total $130,000. The company
estimates that 10% of accounts receivable will be uncollectible. Record the adjustment for
uncollectible accounts on December 31, 2021.
234) A company has the following balances on December 31, 2021, after year-end adjustments:
Accounts Receivable = $62,000; Allowance for Uncollectible Accounts = $6,000. Calculate net
accounts receivable.
235) A company has the following balances on December 31, 2021, after year-end adjustments:
Accounts Receivable = $75,000; Service Revenue = $400,000; Allowance for Uncollectible
Accounts = $5,000; Cash = $20,000. Calculate net accounts receivable.
236) A company uses the allowance method to account for uncollectible accounts. During the
year, the company has actual bad debts of $25,000. Record the write-off of the uncollectible
accounts.
237) At the beginning of the year, a company had an Allowance for Uncollectible Accounts of
$22,000. By the end of the year, actual bad debts total $24,000. What is the balance of the
Allowance for Uncollectible Accounts after the write-offs (before any year-end adjustment)?
238) On March 13, a company writes off a customer’s account of $3,800. On June 3, the customer
unexpectedly pays the $3,800 balance. Using the allowance method, record the write-off on March
13 and the cash collection on June 3.
239) At the end of the year, a company has a balance in Allowance for Uncollectible Accounts of
$200 (credit) before any year-end adjustment. The balance of Accounts Receivable is $15,000.
The company estimates that 10% of accounts receivable will not be collected over the next year.
Record the adjustment for uncollectible accounts.
240) At the end of the year, a company has a balance in Allowance for Uncollectible Accounts of
$2,000 (credit) before any year-end adjustment. The balance of Accounts Receivable is $180,000.
The company estimates that 5% of accounts receivable will not be collected over the next year.
Record the adjustment for uncollectible accounts.
95
241) At the end of the year, a company has a balance in Allowance for Uncollectible Accounts of
$2,000 (debit) before any year-end adjustment. The balance of Accounts Receivable is $180,000.
The company estimates that 5% of accounts receivable will not be collected over the next year.
Record the adjustment for uncollectible accounts.
96
242) A company reports the following amounts at the end of the year (before any year-end
adjustment).
Credit sales for the year
$120,000
Accounts receivable
36,000
Allowance for uncollectible accounts
1,500
(credit)
Record the adjustment for uncollectible accounts (1) using the percentage-of-receivables method,
assuming the company estimates 10% of receivables will not be collected, and (2) using the
percentage-of-credit-sales method, assuming the company estimates 2% of credit sales will not be
collected.
Bad Debt Expense
2,100
Allowance for Uncollectible Accounts
2,100
Bad Debt Expense
2,400
Allowance for Uncollectible Accounts
2,400
243) A company has the following accounts receivable and estimates of uncollectible accounts:
1. Accounts not yet due = $60,000; estimated uncollectible = 3%.
2. Accounts 1-30 days past due = $20,000; estimated uncollectible = 20%.
3. Accounts more than 30 days past due = $10,000; estimated uncollectible = 50%.
Compute the total estimated uncollectible accounts.
244) At the end of the year, a company has the following accounts receivable and estimates of
uncollectible accounts:
1. Accounts not yet due = $80,000; estimated uncollectible = 2%.
2. Accounts 1-30 days past due = $20,000; estimated uncollectible = 25%.
3. Accounts more than 30 days past due = $4,000; estimated uncollectible = 60%.
Record the year-end adjustment for uncollectible accounts, assuming the current balance of the
Allowance for Uncollectible Accounts is $900 (credit).
98
245) At the end of the year, a company has the following accounts receivable and estimates of
uncollectible accounts:
1. Accounts not yet due = $70,000; estimated uncollectible = 4%.
2. Accounts 1-30 days past due = $30,000; estimated uncollectible = 15%.
3. Accounts more than 30 days past due = $5,000; estimated uncollectible = 40%.
Record the year-end adjustment for uncollectible accounts, assuming the current balance of the
Allowance for Uncollectible Accounts is $1,200 (debit).
246) A company has the following balances on December 31, 2021, before any year-end
adjustments: Accounts Receivable = $80,000; Allowance for Uncollectible Accounts = $1,100
(credit). The company estimates uncollectible accounts based on an aging of accounts receivable
as shown below:
Age Group
Amount
Receivable
Estimated Percent
Uncollectible
Not yet due
$48,000
5%
0-30 days past due
18,000
15%
31-90 days past due
10,000
40%
More than 90 days past due
4,000
80%
Total
$80,000
Record the adjustment for uncollectible accounts on December 31, 2021.
Bad Debt Expense
11,200
11,200
247) Calculate the missing amount for each of the following notes receivable.
Face Value
Annual
Interest rate
Fraction of
the Year
Interest
$15,000
4%
8 months
(a)
$25,000
8%
(b)
$500
$30,000
(c)
4 months
$500
(d)
6%
6 months
$600
248) On February 1, 2021, a company loans one of its employees $20,000 and accepts a
nine-month, 8% note receivable. Calculate the amount of interest revenue the company will
recognize in 2021.