Accounting, 9e (Horngren)
Chapter 8 Receivables
Learning Objective 8-1
1) The two major types of receivables are accounts receivable and notes receivable.
2) The creditor is the entity that signs a note.
3) The two major types of receivables are interest receivable and taxes receivable.
4) Notes receivable are usually longer in term than accounts receivable.
5) Which of the following is a benefit of selling on credit?
A) Revenues are increased by making sales to a wider range of customers.
B) Expenses are reduced by making sales to a wide range of customers.
C) Some customers do not pay, creating an expense.
D) Cash is received sooner.
6) Which of the following is a disadvantage of selling on credit?
A) Sales can be made to a more diverse group of customers.
B) Profits are increased by making sales to a wider range of customers.
C) Some customers do not pay, creating an expense.
D) Prices must be reduced when selling on credit.
7) Which of the following is included in the category Other receivables?
A) Loans to employees
B) Accounts receivables
C) Notes receivables
D) Investments
8) A record that contains the details by customer or vendor of the individual account balances would be called a:
A) control account.
B) subsidiary ledger.
C) journal.
D) liability account.
9) A creditor is a person or business who:
A) has a receivable from another party.
B) has a payable to another party.
C) invests money in the stock of a company.
D) purchases goods on account.
10) Which of the following statements is TRUE?
A) Accounts receivable are more liquid than cash.
B) Notes receivable are always due in 30 days.
C) Notes receivable are longer in term than accounts receivable.
D) Accounts receivable are liabilities.
11) GAAP prefers companies to use the:
A) direct write-off method to evaluate bad debts.
B) allowance method to evaluate bad debts.
C) amortization method to evaluate bad debts.
D) 360-day method to evaluate bad debts.
12) Which of the following is NOT a key issue in controlling and managing receivables?
A) Separate cash-handling, credit, and accounting duties to keep employees from stealing cash collected from
customers.
B) Extend credit only to customers who are most likely to pay.
C) Pursue collection from customers to maximize cash flow.
D) Separate the responsibility for custody and protection of inventory assets from the accounting for inventory
assets.
13) Which of the following duties should NOT be performed by a credit department?
A) Monitor customer payment records.
B) Handle cash receipts.
C) Evaluate customers who apply for credit.
D) Review applicant’s income and credit history.
Learning Objective 8-2
1) The allowance method is a method of recording collection losses by estimating uncollectible amounts.
2) The income statement approach computes uncollectible accounts expense as a percentage of net credit sales.
3) The income statement approach computes uncollectible accounts expense by analyzing accounts receivable.
4) The aging–of-accounts-receivable method computes uncollectible accounts expense as a percentage of net credit
sales.
5) The aging method is a balance sheet approach of estimating uncollectible accounts.
6) Which of the following are the two methods of accounting for uncollectible receivables?
A) The direct write-off method and the liability method
B) The asset method and the sales method
C) The allowance method and the liability method
D) The allowance method and the direct write-off method
7) Which of the following are the two methods of estimating uncollectible receivables?
A) The allowance method and the amortization method
B) The aging-of-accounts-receivable method and the percent–of-sales method
C) The gross-up method and the direct write-off method
D) The direct write-off method and the percent-of-completion method
8) Which of the following entries would be used to account for uncollectible receivables using the allowance
method?
A) Allowance for uncollectible accounts is debited and Uncollectible accounts expense is credited.
B) Uncollectible accounts expense is debited and Allowance for uncollectible accounts is credited.
C) Uncollectible accounts expense is debited and Accounts receivable is credited.
D) Accounts receivable is debited and Uncollectible accounts expense is credited.
9) The Allowance for uncollectible accounts currently has a credit balance of $200. The company’s management
estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount
of Uncollectible account expense reported on the income statement?
A) $3,275
B) $3,075
C) $2,875
D) $2,675
10) The Allowance for uncollectible accounts currently has a credit balance of $200. The company’s management
estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the balance
of the Allowance for uncollectible accounts reported on the balance sheet?
A) $3,275
B) $3,075
C) $2,675
D) $2,875
11) The Allowance for uncollectible accounts currently has a debit balance of $200. The company’s management
estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount
of Uncollectible accounts expense reported on the income statement?
A) $2,675
B) $2,875
C) $3,275
D) $3,075
12) The Allowance for uncollectible accounts currently has a debit balance of $200. The company’s management
estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the balance
of the Allowance for uncollectible accounts reported on the balance sheet?
A) $2,675
B) $2,875
C) $3,275
D) $3,075
13) The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts
in the accounts receivable subsidiary ledger using the aging method, the company’s management estimates that
uncollectible accounts will be $15,000. What will be the amount of Uncollectible accounts expense reported on the
income statement?
A) $15,900
B) $14,900
C) $14,100
D) $15,000
14) The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts
in the accounts receivable subsidiary ledger using the aging method, the company’s management estimates that
uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible accounts
reported on the balance sheet?
A) $15,000
B) $14,900
C) $15,900
D) $14,100
15) The Allowance for uncollectible accounts currently has a debit balance of $900. After analyzing the accounts in
the accounts receivable subsidiary ledger using the aging method, the company’s management estimates that
uncollectible accounts will be $15,000. What will be the amount of Uncollectible account expense reported on the
income statement?
A) $14,900
B) $15,000
C) $14,100
D) $15,900
16) The Allowance for uncollectible accounts currently has a debit balance of $750. After analyzing the accounts in
the accounts receivable subsidiary ledger, the company’s management estimates that uncollectible accounts will be
$16,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet?
A) $15,250
B) $16,000
C) $14,900
D) $16,250
17) The following information is from the 2013 records of Armadillo Camera Shop:
Accounts receivable, December 31, 2013
$20,000 (debit)
Allowance for uncollectible accounts, December 31, 2013
prior to adjustment
600 (debit)
Net credit sales for 2013
95,000
Accounts written off as uncollectible during 2013
7,000
Cash sales during 2013
27,000
Uncollectible accounts expense is estimated by the percent-of-sales method. Management estimates that 3% of net
credit sales will be uncollectible. Which of the following will be the amount of Uncollectible accounts expense?
A) $7,000
B) $3,450
C) $2,250
D) $2,850
18) The following information is from the 2013 records of Armadillo Camera Shop:
Accounts receivable, December 31, 2013
$20,000 (debit)
Allowance for uncollectible accounts, December 31, 2013
prior to adjustment
600 (debit)
Net credit sales for 2013
95,000
Accounts written off as uncollectible during 2013
7,000
Cash sales during 2013
27,000
Uncollectible accounts expense is estimated by the aging–of-accounts-receivable method. Management estimates
that $2,850 of accounts receivable will be uncollectible. Which of the following will be the amount of Uncollectible
accounts expense?
A) $7,000
B) $2,250
C) $3,450
D) $2,850
19) The following information is from the 2013 records of Armadillo Camera Shop:
Accounts receivable, December 31, 2013
$20,000 (debit)
Allowance for uncollectible accounts, December 31, 2013
prior to adjustment
600 (debit)
Net credit sales for 2013
95,000
Accounts written off as uncollectible during 2013
7,000
Cash sales during 2013
27,000
Uncollectible accounts expense is estimated by the percent-of-sales method. Management estimates that 3% of net
credit sales will be uncollectible. Which of the following will be the balance of the Allowance for uncollectible
accounts after adjustment?
A) $7,000
B) $3,450
C) $2,850
D) $2,250
20) The following information is from the 2013 records of Armadillo Camera Shop:
Accounts receivable, December 31, 2013
$20,000 (debit)
Allowance for uncollectible accounts, December 31, 2013
prior to adjustment
600 (debit)
Net credit sales for 2013
95,000
Accounts written off as uncollectible during 2013
7,000
Cash sales during 2013
27,000
Uncollectible accounts expense is estimated by the aging–of-accounts-receivable method. Management estimates
that $2,850 of accounts receivable will be uncollectible. Which of the following will be the balance of the
Allowance for uncollectible accounts after adjustment?
A) $2,850
B) $3,450
C) $7,000
D) $2,250
21) The following information is from the 2013 records of Armadillo Camera Shop:
Accounts receivable, December 31, 2013
$20,000 (debit)
Allowance for uncollectible accounts, December 31, 2013
prior to adjustment
600 (debit)
Net credit sales for 2013
95,000
Accounts written off as uncollectible during 2013
7,000
Cash sales during 2013
27,000
Uncollectible accounts expense is estimated by the percent-of-sales method. Management estimates that 3% of net
credit sales will be uncollectible. Which of the following will be the amount of net Accounts receivable after
adjustment?
A) $16,550
B) $17,750
C) $17,150
D) $13,000
22) A newly created design business called Smart Art is just finishing up its first year of operations. During the
year, there were credit sales of $40,000 and collections of $36,000. One account for $650 was written off. Smart
Art uses the percent-of-sales method to account for uncollectible account expense, and has decided to use a factor of
2% for their year-end adjustment of uncollectible account expense. At the end of the year, what is the ending
balance in Accounts receivable?
A) $4,000
B) $36,000
C) $3,350
D) $39,350
23) A newly created design business called Smart Art is just finishing up its first year of operations. During the
year, there were credit sales of $40,000 and collections of $36,000. One account for $650 was written off. Smart
Art uses the percent-of-sales method to account for uncollectible account expense, and has decided to use a factor of
2% for their year-end adjustment of uncollectible account expense. At the end of the year, what is the ending
balance in the Allowance for uncollectible accounts?
A) $150
B) $800
C) $250
D) $1,450
24) A newly created design business called Smart Art is just finishing up its first year of operations. During the
year, there were credit sales of $40,000 and collections of $36,000. One account for $650 was written off. Smart
Art uses the percent-of-sales method to account for uncollectible account expense, and has decided to use a factor of
2% for their year-end adjustment of uncollectible account expense. At the end of the year, what is the balance in
Uncollectible account expense?
A) $150
B) $800
C) $250
D) $1,450
25) A newly created design business called Smart Art is just finishing up its first year of operations. During the
year, there were credit sales of $40,000 and collections of $36,000. One account for $650 was written off. Smart
Art uses the aging method to account for uncollectible account expense, and has calculated an amount of $200 as
their estimate of uncollectible amounts at year-end. At the end of the year, what is the ending balance in Accounts
receivable?
A) $4,000
B) $36,000
C) $3,350
D) $39,350
26) A newly created design business called Smart Art is just finishing up its first year of operations. During the
year, there were credit sales of $40,000 and collections of $36,000. One account for $650 was written off. Smart
Art uses the aging method to account for uncollectible account expense, and has calculated an amount of $200 as
their estimate of uncollectible amounts at year-end. At the end of the year, what is the ending balance in the
Allowance for uncollectible accounts?
A) $150
B) $800
C) $200
D) $1,450
27) A newly created design business called Smart Art is just finishing up its first year of operations. During the
year, there were credit sales of $40,000 and collections of $36,000. One account for $650 was written off. Smart
Art uses the aging method to account for uncollectible account expense, and has calculated an amount of $200 as
their estimate of uncollectible amounts at year-end. At the end of the year, what is the ending balance in
Uncollectible account expense?
A) $150
B) $800
C) $200
D) $850
28) At the beginning of 2014, Mark’s sales had the following ledger balances:
During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700 of write-offs. At the end of
the year, Mark’s adjusted for uncollectible account expense using the percent–of-sales method, and applied a rate,
based on past history, of 1.2%. At the end of the year, what was the balance in the Accounts receivable?
A) $10,300
B) $3,700
C) $14,000
D) $21,300
29) At the beginning of 2014, Mark’s sales had the following ledger balances:
During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700 of write-offs. At the end of
the year, Mark’s adjusted for uncollectible account expense using the percent–of-sales
method, and applied a rate, based on past history, of 1.2%. At the end of the year, what was the balance in the
Allowance account?
A) $2,300
B) $1,700
C) $6,400
D) $2,700
30) At the beginning of 2014, Mark‘s sales had the following ledger balances:
During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700 of write-offs. At the end of
the year, Mark’s adjusted for uncollectible account expense using the percent-of-sales method, and applied a rate,
based on past history, of 1.2%. At the end of the year, what was the balance in the Uncollectible accounts expense?
A) $2,300
B) $5,400
C) $6,400
D) $2,700
31) At the beginning of 2014, Mark’s sales had the following ledger balances:
During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700 of write-offs. At the end of
the year, Mark’s adjusted for uncollectible account expense using the aging method, and calculated an amount of
$1,600 as their estimate of uncollectible accounts. At the end of the year, what was the balance in the Accounts
receivable?
A) $10,300
B) $3,700
C) $14,000
D) $21,300
32) At the beginning of 2014, Mark’s sales had the following ledger balances:
During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700 of write-offs. At the end of
the year, Mark’s adjusted for uncollectible account expense using the aging method, and calculated an amount of
$1,600 as their estimate of uncollectible accounts. At the end of the year, what was the balance in the Allowance
account?
A) $1,600
B) $1,700
C) $6,400
D) $2,700
33) At the beginning of 2014, Mark’s sales had the following ledger balances:
During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700 of write-offs. At the end of
the year, Mark’s adjusted for uncollectible account expense using the aging method, and calculated an amount of
$1,600 as their estimate of uncollectible accounts. At the end of the year, what was the balance in the Uncollectible
account expense?
A) $2,300
B) $5,400
C) $4,300
D) $2,700
34) As Perry Materials Supply was preparing for the year-end close, their balances were as follows:
Perry Materials uses the aging method and has completed the following analysis of the accounts receivable:
Customer
1-30 Days
31-60 Days
61-90 Days
Total Balance
Johnson
$4,600
$3,200
$7,800
Hot Pots, Inc.
800
1,800
Potter
40,000
550
40,550
Harrison
3,600
900
4,500
Marx
2,000
2,050
Younger
65,000
65,000
Merry Maids
5,900
5,900
Acher
12,000
6,400
18,400
Totals
$127,500
$13,750
$3,700
$146,000
Uncollectible percentage
2%
10%
20%
Estimated uncollectible
amount
$2,550
$1,375
$740
$5,085
How much will the Uncollectible account expense for the year be?
A) $2,550
B) $1,115
C) $5,085
D) $11,285
35) As Perry Materials Supply was preparing for the year-end close, their balances were as follows:
Perry Materials uses the aging method and has completed the following analysis of the accounts receivable:
Customer
1-30 Days
31-60 Days
61-90 Days
Total Balance
Johnson
$4,600
$3,200
$7,800
Hot Pots, Inc.
800
1,800
Potter
40,000
550
40,550
Harrison
3,600
900
4,500
Marx
2,000
2,050
Younger
65,000
65,000
Merry Maids
5,900
5,900
Acher
12,000
6,400
18,400
Totals
$127,500
$13,750
$3,700
$146,000
Uncollectible percentage
2%
10%
20%
Estimated uncollectible
amount
$2,550
$1,375
$740
$5,085
What will the final balance in the Allowance account be, after adjusting for uncollectible account expense?
A) $2,550
B) $11,285
C) $5,085
D) $11,285
36) Accounts receivable has a balance of $16,000 and the Allowance for uncollectible accounts has a credit balance
of $1,700. What is Net accounts receivable before and after a $60 account receivable is written off?
A) $14,300 before and $14,240 after
B) $14,300 before and $14,300 after
C) $16,000 before and $15,940 after
D) $16,000 before and $16,000 after
37) Accounts receivable has a balance of $5,000 and the Allowance for uncollectible accounts has a credit balance
of $440. What is Net accounts receivable after a $160 account receivable is written off?
A) $4,400
B) $4,720
C) $4,560
D) $5,000
38) At January 1, Davidson Services has the following balances:
During the year, Davidson has $104,000 of credit sales, collections of $100,000, and write-offs of $1,400.
Davidson records Uncollectible accounts expense at the end of the year using the percent–of-sales method, and
applies a rate of 1.1%, based on past history.
Prior to the year-end entry to adjust the Uncollectible accounts expense, what is the balance in Accounts receivable?
A) $2,600
B) $11,600
C) $4,000
D) $13,000
39) At January 1, Davidson Services has the following balances:
During the year, Davidson has $104,000 of credit sales, collections of $100,000, and write-offs of $1,400.
Davidson records Uncollectible account expense at the end of the year using the percent-of-sales method, and
applies a rate of 1.1%, based on past history.
Prior to the year-end entry to adjust the Uncollectible accounts expense, what is the balance in the Allowance for
uncollectible accounts?
A) Debit of $1,400
B) Credit of $800
C) Debit of $600
D) Credit of $2,200