Question 1

A company uses the direct write-off method.The company writes off a $3,000 customer account balance when it becomes clear that the particular customer will never pay.What is the journal entry that would be prepared to record this write-off?

Accepted Answer

A)   Debit Bad Debt Expense and credit Accounts Receivable for $3,000
B)   Debit Allowance for Doubtful Accounts and credit Bad Debt Expense for $3,000
C)   Debit Bad Debt Expense and credit Allowance for Doubtful Accounts for $3,000
D)   Debit Accounts Receivable and credit Bad Debt Expense for $3,000

Question 2

The decision to sell to extend credit to customers will decrease wage costs.

Accepted Answer

A) True 
 B)False

Question 3

Notes Receivable differ from Accounts Receivable in that Notes Receivable:

Accepted Answer

A)   generally charge interest from the day they are signed to the day they are collected
B)   are noncurrent assets
C)   do not have to be created for every new transaction, so they are used more frequently
D)   are generally considered a weaker legal claim

Question 4

If the Allowance for Doubtful Accounts on January 1 equals $10,000 and during the year $9,000 of specific customers' accounts were written off,then its Allowance for Doubtful Accounts will have an unadjusted balance of:

Accepted Answer

A)   $1,000 credit.
B)   $1,000 debit.
C)   $10,000 credit.
D)   $9,000 debit.

Question 5

The Allowance for Doubtful Accounts account is a temporary account which is closed to Retained Earnings at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 6

Katy Company uses the allowance method.Katy writes off a customer account balance when it becomes clear that the particular customer will never pay.How will this write-off affect the company's net income and accounts receivable turnover ratio?

Accepted Answer

A)   Net income and the account receivable turnover ratio will both decrease.
B)   Net income will decrease; the account receivable turnover ratio will not change.
C)   Net income will not change; the account receivable turnover ratio will decrease.
D)   Net income will not change; the account receivable turnover ratio will not change.

Question 7

Adams Co.uses the allowance method of determining bad debt expense.It collects $250 from a customer that Adams had previously written-off.As a result of collecting this $250,its:

Accepted Answer

A)   total assets increases by $250.
B)   net income increases by $250.
C)   total assets remains the same.
D)   stockholders' equity increases by $250. C

Question 8

When a company lends cash to a customer who signs a promissory note:

Accepted Answer

A)   total assets decrease when the lending transaction occurs, but increase when the amount borrowed by the customer is repaid.
B)   total assets increase when the lending transaction occurs and revenues increase when the amount borrowed by the customer is repaid.
C)   total assets increase and liabilities increase when the lending transaction occurs.
D)   total assets and net income do not change when the lending transaction occurs.

Question 9

Which method requires first estimating the desired amount for the Allowance for Doubtful Accounts and then determining the amount of the expense required to get to this desired balance given the amount of the unadjusted balance?

Accepted Answer

A)   Aging of accounts receivable method
B)   Percentage of credit sales method
C)   Direct write-off method
D)   Percentage of bad debts method

Question 10

When the direct write-off method is used,the entry to write-off a specific account would:

Accepted Answer

A)   increase net income.
B)   have no effect on net income.
C)   increase Accounts Receivable and increase net income.
D)   decrease Accounts Receivable and decrease net income.

Question 11

XYZ Corp.uses the percentage of credit sales method in determining its bad debt expense.The following information comes from the accounting records of XYZ Corp.:

What is the estimate of bad debt expense?

Accepted Answer

A)   $24,000
B)   $25,000
C)   $29,000
D)   $30,000

Question 12

If the Allowance for Doubtful Accounts has a $1,000 debit balance prior to making the end-of-period adjusting entry for bad debts,then it must mean that:

Accepted Answer

A)   $1,000 more accounts receivables were written off than were estimated back when the prior period's adjusting entry for bad debts was recorded
B)   $1,000 fewer accounts receivables were written off than were estimated back when the prior period's adjusting entry for bad debts was recorded
C)   the direct write-off method was used
D)   the aging method was used

Question 13

North Co.uses the aging of accounts receivable method.The following information comes from its accounting records:

What is the estimate of bad debt expense?

Accepted Answer

A)   $5,000
B)   $9.000
C)   $14,000
D)   $19,000 C

Question 14

The selected financial information set forth below was summarized from the most recent income statements and balance sheets of the Pixel Company.
  
Required:
Part a.Determine the company's receivables turnover during Years 2 and 3.
Part b.Determine the company's days to collect during Years 2 and 3.
Part c.Interpret the results of this analysis.

Accepted Answer

Part a
Receivable Turnover = Net credit ...

Question 15

Countryside Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be collected.To record the potential bad debts,Countryside Corporation would debit:

Accepted Answer

A)   Accounts Receivable and credit Allowance for Doubtful Accounts for $120.
B)   Allowance for Doubtful Accounts and credit Bad Debt Expense for $120.
C)   Bad Debt Expense and credit Allowance for Doubtful Accounts for $120.
D)   Bad Debt Expense and credit Accounts Receivable for $120. C

Question 16

Assume the Hart Company uses the allowance method.When the company writes off a customer's account balance that has no chance of collection:

Accepted Answer

A)   total assets will decrease.
B)   total liabilities will increase.
C)   expenses and revenues will both increase.
D)   total assets will decrease and expenses will increase.

Question 17

IBM signs an agreement to lend one of its customers $200,000 to be repaid in one year at 5% interest.IBM would record this loan as:

Accepted Answer

A)   Notes Payable.
B)   Accounts Receivable.
C)   Notes Receivable.
D)   Unearned Revenue.

Question 18

The unadjusted trial balance at the end of the year includes the following:

Both accounts have normal balances.The company uses the aging of accounts receivable method.Its estimate of uncollectible receivables resulting from the aging analysis equals $5,800.What is the amount of Bad Debt Expense to be recorded for the year?

Accepted Answer

A)   $5,800
B)   $4,800
C)   $6,800
D)   $7,800

Question 19

On December 31,2015,Infinity Inc.records an adjusting entry to accrue interest on a note.On January 31,2016,Infinity receives a check for $4,680,which represents two months of accumulated interest on the note.Upon receipt of this interest payment,Infinity should debit:

Accepted Answer

A)   Interest Receivable for $2,340, debit Cash $2,340, and credit Interest Revenue for $4,680.
B)   Cash for $4,680, credit Interest Receivable for $2,340, and credit Interest Revenue for $2,340.
C)   Cash for $4,680 and credit Interest Receivable for $4,680.
D)   Cash for $4,680 and credit Interest Revenue for $4,680.

Question 20

What effect does the collection of a note receivable,excluding interest,have on the accounting equation?

Accepted Answer

A)   Total assets remain the same.
B)   Assets are reduced and stockholders' equity is reduced.
C)   Assets are increased and stockholders' equity is increased.
D)   Assets are reduced and liabilities are reduced.

Exam 8: Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

A company uses the direct write-off method.The company writes off a $3,000 customer account balance when it becomes clear that the particular customer will never pay.What is the journal entry that would be prepared to record this write-off?

Correct Answer
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The decision to sell to extend credit to customers will decrease wage costs.

Correct Answer
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Notes Receivable differ from Accounts Receivable in that Notes Receivable:

Correct Answer
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If the Allowance for Doubtful Accounts on January 1 equals $10,000 and during the year $9,000 of specific customers' accounts were written off,then its Allowance for Doubtful Accounts will have an unadjusted balance of:

Correct Answer
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The Allowance for Doubtful Accounts account is a temporary account which is closed to Retained Earnings at the end of the accounting period.

Correct Answer
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Katy Company uses the allowance method.Katy writes off a customer account balance when it becomes clear that the particular customer will never pay.How will this write-off affect the company's net income and accounts receivable turnover ratio?

Correct Answer
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Adams Co.uses the allowance method of determining bad debt expense.It collects $250 from a customer that Adams had previously written-off.As a result of collecting this $250,its:

Correct Answer
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C

When a company lends cash to a customer who signs a promissory note:

Correct Answer
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Which method requires first estimating the desired amount for the Allowance for Doubtful Accounts and then determining the amount of the expense required to get to this desired balance given the amount of the unadjusted balance?

Correct Answer
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When the direct write-off method is used,the entry to write-off a specific account would:

Correct Answer
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XYZ Corp.uses the percentage of credit sales method in determining its bad debt expense.The following information comes from the accounting records of XYZ Corp.: What is the estimate of bad debt expense?

Correct Answer
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If the Allowance for Doubtful Accounts has a $1,000 debit balance prior to making the end-of-period adjusting entry for bad debts,then it must mean that:

Correct Answer
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North Co.uses the aging of accounts receivable method.The following information comes from its accounting records: What is the estimate of bad debt expense?

Correct Answer
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C

Correct Answer
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Part a
Receivable Turnover = Net credit ...
View Answer

Countryside Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be collected.To record the potential bad debts,Countryside Corporation would debit:

Correct Answer
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C

Assume the Hart Company uses the allowance method.When the company writes off a customer's account balance that has no chance of collection:

Correct Answer
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IBM signs an agreement to lend one of its customers $200,000 to be repaid in one year at 5% interest.IBM would record this loan as:

Correct Answer
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Correct Answer
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On December 31,2015,Infinity Inc.records an adjusting entry to accrue interest on a note.On January 31,2016,Infinity receives a check for $4,680,which represents two months of accumulated interest on the note.Upon receipt of this interest payment,Infinity should debit:

Correct Answer
verified

What effect does the collection of a note receivable,excluding interest,have on the accounting equation?

Correct Answer
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Exam 8: Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

A company uses the direct write-off method.The company writes off a $3,000 customer account balance when it becomes clear that the particular customer will never pay.What is the journal entry that would be prepared to record this write-off?

Correct AnswerverifiedShow Answer

The decision to sell to extend credit to customers will decrease wage costs.

Correct AnswerverifiedShow Answer

Notes Receivable differ from Accounts Receivable in that Notes Receivable:

Correct AnswerverifiedShow Answer

If the Allowance for Doubtful Accounts on January 1 equals $10,000 and during the year $9,000 of specific customers' accounts were written off,then its Allowance for Doubtful Accounts will have an unadjusted balance of:

Correct AnswerverifiedShow Answer

The Allowance for Doubtful Accounts account is a temporary account which is closed to Retained Earnings at the end of the accounting period.

Correct AnswerverifiedShow Answer

Katy Company uses the allowance method.Katy writes off a customer account balance when it becomes clear that the particular customer will never pay.How will this write-off affect the company's net income and accounts receivable turnover ratio?

Correct AnswerverifiedShow Answer

Adams Co.uses the allowance method of determining bad debt expense.It collects $250 from a customer that Adams had previously written-off.As a result of collecting this $250,its:

Correct AnswerverifiedC

When a company lends cash to a customer who signs a promissory note:

Correct AnswerverifiedShow Answer

Which method requires first estimating the desired amount for the Allowance for Doubtful Accounts and then determining the amount of the expense required to get to this desired balance given the amount of the unadjusted balance?

Correct AnswerverifiedShow Answer

When the direct write-off method is used,the entry to write-off a specific account would:

Correct AnswerverifiedShow Answer

XYZ Corp.uses the percentage of credit sales method in determining its bad debt expense.The following information comes from the accounting records of XYZ Corp.: What is the estimate of bad debt expense?

Correct AnswerverifiedShow Answer

If the Allowance for Doubtful Accounts has a $1,000 debit balance prior to making the end-of-period adjusting entry for bad debts,then it must mean that:

Correct AnswerverifiedShow Answer

North Co.uses the aging of accounts receivable method.The following information comes from its accounting records: What is the estimate of bad debt expense?

Correct AnswerverifiedC

Correct AnswerverifiedPart aReceivable Turnover = Net credit ...View AnswerShow Answer

Countryside Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be collected.To record the potential bad debts,Countryside Corporation would debit:

Correct AnswerverifiedC

Assume the Hart Company uses the allowance method.When the company writes off a customer's account balance that has no chance of collection:

Correct AnswerverifiedShow Answer

IBM signs an agreement to lend one of its customers $200,000 to be repaid in one year at 5% interest.IBM would record this loan as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On December 31,2015,Infinity Inc.records an adjusting entry to accrue interest on a note.On January 31,2016,Infinity receives a check for $4,680,which represents two months of accumulated interest on the note.Upon receipt of this interest payment,Infinity should debit:

Correct AnswerverifiedShow Answer

What effect does the collection of a note receivable,excluding interest,have on the accounting equation?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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C

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C

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Part a
Receivable Turnover = Net credit ...
View Answer

Correct Answer
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C

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