Chapter 9: Receivables
63.
If the direct write-off method of accounting for uncollectible receivables is used, what general ledger
account is
credited to write off a customer’s account as uncollectible?
a.
Uncollectible Accounts Expense
b.
Accounts Receivable
c.
Allowance for Doubtful Accounts
d.
Interest Expense
64.
One of the weaknesses of the direct write-off method is that it
a.
understates accounts receivable on the balance sheet
b.
violates the matching principle
c.
is too difficult to use for many companies
d.
is based on estimates
65.
The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable.
Lowery has
a customer whose accounts receivable balance has been determined to likely be uncollectible.
The entry to write
off this account would be which of the following?
a.
debit Allowance for Doubtful Accounts; credit Accounts Receivable
b.
debit Sales Returns and Allowance; credit Accounts Receivable
c.
debit Bad Debt Expense; credit Allowance for Doubtful Accounts
d.
debit Bad Debt Expense; credit Accounts Receivable
Chapter 9: Receivables
66.
If the direct write-off method of accounting for uncollectible receivables is used, what general ledger
account is
debited to write off a customer’s account as uncollectible?
a.
Uncollectible Accounts Receivable
b.
Accounts Receivable
c.
Allowance for Doubtful Accounts
d.
Bad Debt Expense
67.
If the allowance method of accounting for uncollectible receivables is used, what general ledger account is
debited
to write off a customer’s account as uncollectible?
a.
Uncollectible Accounts Expense
b.
Allowance for Doubtful Accounts
c.
Accounts Receivable
d.
Interest Expense
68.
After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance
of $340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable
value of the
accounts receivable?
a. $51,000
b. $289,000
c. $340,000
d. $391,000
Chapter 9: Receivables
69.
If the allowance method of accounting for uncollectible receivables is used, what general ledger account is
credited
to write off a customer’s account as uncollectible?
a.
Uncollectible Accounts Expense
b.
Accounts Receivable
c.
Allowance for Doubtful Accounts
d.
Interest Expense
70.
On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the
a.
uncollectible accounts expense for the year
b.
total of the accounts receivables written-off during the year
c.
total estimated uncollectible accounts as of the end of the year
d.
sum of all accounts that are past due
71.
What is the type of account and normal balance of Allowance for Doubtful Accounts?
a.
contra asset, credit
b.
asset, debit
c.
asset, credit
d.
contra asset, debit
Chapter 9: Receivables
72.
When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when
a.
a customer’s account becomes past due
b.
an account becomes bad and is written off
c.
a sale is made
d.
management estimates the amount of uncollectibles
73.
A debit balance in the Allowance for Doubtful Accounts
a.
is the normal balance for that account
b.
indicates that actual bad debt write-offs have been less than what was estimated
c.
cannot occur if the percentage of receivables method of estimating bad debts is used
d.
indicates that actual bad debt write-offs have exceeded previous provisions for bad debts
74.
To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a
a.
debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts
b.
debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts
c.
debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable
d.
debit to Loss on Credit Sales and a credit to Accounts Receivable
Chapter 9: Receivables
75.
Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts
a.
liabilities decrease
b.
net income is unchanged
c.
total assets are unchanged
d.
total assets decrease
76.
Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is
$390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of
the
outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the
Allowance for
Doubtful Accounts has a credit balance of $2,500 before adjustment?
a. Bad Debt Expense
Allowance for Doubtful Accounts
17,000
17,000
b. Bad Debt Expense
Allowance for Doubtful Accounts
19,500
19,500
c. Bad Debt Expense
Allowance for Doubtful Accounts
22,000
22,000
d. Bad Debt Expense
Allowance for Doubtful Accounts
65,000
65,000
Chapter 9: Receivables
77.
You have just received notice that a customer of yours with an Account Receivable balance of $100 has
gone
bankrupt and will not make any future payments. Assuming you use the allowance method, the entry
you make is
to
a.
debit Bad Debt Expense and credit Allowance for Doubtful Accounts
b.
debit Bad Debt Expense and credit Accounts Receivable
c.
debit Allowance for Doubtful Accounts and credit Accounts Receivable
d.
debit Allowance for Doubtful Accounts and credit Bad Debt Expense
78.
The balance in Allowance for Doubtful Accounts will directly impact the end–of-period adjustment for the
bad debt
expense when using which of the following methods?
a.
allowance method based on aging the receivables
b.
direct write-off method
c.
accrual method
d.
declining value method
79.
An aging of a company’s accounts receivable indicates the estimate of uncollectible receivables totals $7,900.
If
Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt expense
for the
period will require a
a.
debit to Bad Debt Expense for $8,600
b.
debit to Bad Debt Expense for $7,900
c.
debit to Bad Debt Expense for $7,200
d.
credit to Allowance for Doubtful Accounts for $700
Chapter 9: Receivables
80.
An aging of a company’s accounts receivable indicates that the estimate of uncollectible accounts totals
$6,400. If
Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad
debt expense for the
period will require a
a.
debit to Bad Debt Expense for $7,700
b.
debit to Bad Debt Expense for $6,400
c.
debit to Bad Debt expense for $5,100
d.
credit to Allowance for Doubtful Accounts for $1,300
81.
An aging of a company’s accounts receivable indicates that the estimate of the uncollectible accounts
totals $4,000. If Allowance for Doubtful Accounts has a $800 credit balance, the adjustment to record
the bad debt
expense for the period will require a
a.
debit to Allowance for Doubtful Accounts for $3,200
b.
debit to Bad Debt Expense for $3,200
c.
debit to Allowance for Doubtful Accounts for $4,000
d.
credit to Allowance for Doubtful Accounts for $4,000
82.
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
Chapter 9: Receivables
83.
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
84.
Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the year (before adjustment),
and an
analysis of customers’ accounts indicates uncollectible receivables of $12,900. Which of the
following entries
records the proper adjustment for bad debt expense?
a.
debit Bad Debt Expense, $14,000; credit Allowance for Doubtful Accounts, $14,000
b.
debit Allowance for Doubtful Accounts, $14,000; credit Bad Debt Expense, $14,000
c.
debit Allowance for Doubtful Accounts, $11,800; credit Bad Debt Expense, $11,800
d.
debit Bad Debt Expense, $11,800; credit Allowance for Doubtful Accounts, $11,800
85.
Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year (before adjustment),
and an
analysis of accounts in the customers ledger indicates uncollectible receivables of $13,000. Which
of the following
entries records the proper adjusting entry for bad debt expense?
a.
debit Bad Debt Expense, $600; credit Allowance for Doubtful Accounts, $600
b.
debit Bad Debt Expense, $12,400; credit Allowance for Doubtful Accounts, $12,400
c.
debit Allowance for Doubtful Accounts, $600; credit Bad Debt Expense, $600
d.
debit Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600
Chapter 9: Receivables
86.
At the beginning of the year, the balance in Allowance for Doubtful Accounts is a credit of $760. During the
year, $120 of previously written off accounts are reinstated and accounts totaling $740 are written-off as
uncollectible. The end-of-year balance (before adjustment) in Allowance for Doubtful Accounts should be
a. $760
b. $120
c. $140
d. $740
87.
Jefferson uses the percent of method of estimating uncollectible expenses. Based on past history, 2% of
credit
sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the
following is correct?
a.
Uncollectible accounts are estimated to be $55,500.
b.
Uncollectible accounts are estimated to be $111,000.
c.
Bad debt expense is estimated to be $5,550.
d.
Bad debt expense is estimated to be $11,100.
88.
Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history,
2% of
credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of
the following is
correct regarding the entry to record estimated uncollectible receivables?
a.
Cash will be debited
b.
Bad Debt Expense will be credited
c.
Allowance for Doubtful Accounts will be credited
d.
Accounts Receivable will be debited
Chapter 9: Receivables
89.
Miles uses the allowance method and wrote off the account of James. Miles then received $559 as partial
payment on the account of James. The journal entry to record the initial write-off includes a
a.
debit to Allowance for Doubtful Accounts
b.
credit to Cash
c.
debit to Accounts Receivable, James
d.
credit to Bad Debt Expense
90.
Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific
receivable
previously written off would include a
a.
credit to Bad Debt Expense
b.
credit to Accounts Receivable
c.
debit to Allowance for Doubtful Accounts
d.
debit to Accounts Receivable
91.
Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has
determined that
the Irish Company account is uncollectible. To write off this account, Dalton should debit
a.
Bad Debt Expense and credit Accounts Receivable
b.
Bad Debt Expense and credit Allowance for Doubtful Accounts
c.
Allowance for Doubtful Accounts and credit Accounts Receivable
d.
Accounts Receivable and credit Allowance for Doubtful Accounts
Chapter 9: Receivables
92.
In accounting for uncollectible receivables, the balance in Allowance for Doubtful Accounts will directly
impact the
amount of the adjustment when applying which method?
a.
direct write-off method
b.
percentage of sales method
c.
analysis of receivables method
d.
both percentage of sales and analysis of receivables methods
93.
Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that
3% of
net 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. There were no sales returns or sales discounts during the year. After the adjusting
entry, the December
31, balance in the Bad Debt Expense will be
a. $1,200
b. $3,000
c. $3,600
d. $7,200
94.
A company uses the allowance method to account for uncollectible accounts receivables. 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
Chapter 9: Receivables
95.
Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year (before adjustment).
The
company prepares an analysis of customers’ accounts to estimate the amount of uncollectible accounts
of $41,900. Which of the following adjusting entries would be made to record the Bad Debt Expense for
the year?
a.
debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600
b.
debit Allowance for Doubtful Accounts, $43,200; credit Bad Debt Expense, $43,200
c.
debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200
d.
debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600
96.
Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before
adjustment). The
company prepares an analysis of customers’ accounts and estimates the amount of
uncollectible accounts to be $31,900. Which of the following adjusting entries is needed to record the
Bad Debt Expense for the year?
a.
debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
b.
debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200
c.
debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
d.
debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600
Chapter 9: Receivables
97.
Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year (before adjustment),
and bad
debt expense is estimated at 4% of net credit sales. If net credit sales are $800,000, the amount of
the adjusting
entry to record the estimate of the uncollectible accounts is
a. $29,500
b. $34,500
c. $32,000
d. cannot be determined
98.
Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment),
and an
analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts
should be $16,000. Based on the estimate above, which of the following adjusting entries should be made?
a.
debit Bad Debt Expense, $800; credit Allowance for Doubtful Accounts, $800
b.
debit Bad Debt Expense, $15,200; credit Allowance for Doubtful Accounts, $15,200
c.
debit Allowance for Doubtful Accounts, $800; credit Bad Debt Expense, $800
d.
debit Bad Debt Expense, $16,800; credit Allowance for Doubtful Accounts, $16,800
99.
The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables
shows
that $640 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a
debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for
Doubtful Accounts in the
amount of:
a. $110
b. $640
c. $530
d. $750
Chapter 9: Receivables
100.
Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment),
and bad
debt expense is estimated at 3% of net credit sales. If net credit sales are $300,000, the amount of
the adjusting
entry to record the estimated uncollectible accounts receivables is
a. $8,500
b. $9,500
c. $9,000
d. Cannot be determined
101.
Allowance for Doubtful Accounts is classified as a(n) and has a normal balance.
a.
owners’ equity, credit
b.
contra asset, debit
c.
owners’ equity, debit
d.
contra asset, credit
102.
Under the allowance method of accounting for uncollectible receivables, writing off an uncollectible account.
a.
affects only income statement accounts
b.
is not an acceptable practice
c.
affects only balance sheet accounts
d.
affects both balance sheet and income statement accounts
Chapter 9: Receivables
103.
When comparing the direct write-off method and the allowance method of accounting for uncollectible
receivables,
a major difference is that the direct write-off method
a.
uses a percentage of sales method to estimate uncollectible accounts
b.
is used primarily by large companies with many receivables
c.
is used primarily by small companies with few receivables
d.
uses an allowance account
104.
When a company uses the allowance method of accounting for uncollectible receivables, which entry would
not be
found in the general journal?
a. Bad Debt Expense
Allowance for Doubtful Accounts
500
500
b. Bad Debt Expense
Accounts Receivable, Bob Smith
500
500
c. Cash
300
Allowance for Doubtful Accounts
Accounts Receivable, Bob Smith
200
500
d. Cash
Accounts Receivable, Bob Smith
500
500
Chapter 9: Receivables
105.
When a company uses the allowance method of accounting for uncollectible receivables, the entry to
reinstate a
previously written off account would include a
a.
credit to Bad Debt Expense
b.
debit to Bad Debt Expense
c.
debit to Allowance for Doubtful Accounts
d.
credit to Allowance for Doubtful Accounts
106.
The amount for which a promissory note is written is called the
a.
realizable value
b.
maturity value
c.
face value
d.
proceeds
107.
The amount of the promissory note plus the interest earned on the due date is called the
a.
interest value
b.
maturity value
c.
face value
d.
issuance value
Chapter 9: Receivables
108.
A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of
the note
is
a. $6,860
b. $7,140
c. $7,840
d. $7,000
109.
A 60-day, 9% note for $10,000, dated May 1, is received from a customer on account. The maturity value
of the
note is
a. $10,000
b. $10,150
c. $10,900
d. $9,100
110.
Interest on a note can be calculated without knowledge of the
a.
fair value of the note
b.
rate of interest
c.
note duration
d.
principal amount
Chapter 9: Receivables
111.
On October 1, Black Company receives a 9% interest-bearing note from Reese Company to settle a
$20,000
account receivable. The note is due in six months. At December 31, Black should record
interest revenue of
a.
$0
b. $450
c. $900
d. $1,800
112.
If the maker of a promissory note fails to pay the note on the due date, the note is said to be
a.
displaced
b.
disallowed
c.
dishonored
d.
discounted
113.
The journal entry to record a note received from a customer to replace an account is
a.
debit Notes Receivable; credit Accounts Receivable
b.
debit Accounts Receivable; credit Notes Receivable
c.
debit Cash; credit Notes Receivable
d.
debit Notes Receivable; credit Notes Payable
Chapter 9: Receivables
114.
A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal
entry to
recognize this event is
a.
debit Cash, $6,120; credit Notes Receivable, $6,120
b.
debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Receivable, $120
c.
debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
d.
debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; credit Interest Revenue, $120
115.
When referring to a note receivable or promissory note
a.
the maker is the party to whom the money is due
b.
the note is not considered a formal credit instrument
c.
the note cannot be factored to another party
d.
the note may be used to settle an accounts receivable
116.
When a company receives an interest-bearing note receivable, it will
a.
debit Notes Receivable for the maturity value of the note
b.
debit Notes Receivable for the face value of the note
c.
credit Notes Receivable for the maturity value of the note
d.
credit Notes Receivable for the face value of the note
Chapter 9: Receivables
117.
Paper Company receives a $6,000, 3-month, 6% promissory note from Dame Company in settlement of
an open
accounts receivable. What entry will Paper Company make upon receiving the note?
a.
b.
c.
d.
118.
The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is
a. $40,000
b. $40,400
c. $43,600
d. $44,000