Saturday, June 11, 2011

Chapter 8

1.

A company uses the estimate of sales method to account for uncollectible accounts. When the firm writes off a specific customer's account receivable
Student ResponseValueCorrect AnswerFeedback
Student Response there is no effect on total current assets or total expenses100%Student Response
total current assets are reduced and total expenses are increased
total current assets are reduced
total expenses for the period are increased
Score:1/1

2.

The two methods of accounting for uncollectible receivables are the allowance method and the
Student ResponseValueCorrect AnswerFeedback
cost method
interest method
equity method
Student Response direct write-off method100%Student Response
Score:1/1

3.

Allowance for Doubtful Accounts is listed on the balance sheet under the caption
Student ResponseValueCorrect AnswerFeedback
fixed assets
stockholders’ equity
Student Response current assets100%Student Response
investments
Score:1/1

4.

When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when
Student ResponseValueCorrect AnswerFeedback
a sale is made.
a customer's account becomes past due.
Student Response management estimates the amount of uncollectibles.100%Student Response
an account becomes bad and is written off.
Score:1/1

5.

Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
Student ResponseValueCorrect AnswerFeedback
Student Response when an account is determined to be worthless.100%Student Response
when a credit sale is past due.
whenever a pre-determined amount of credit sales have been made.
at the end of each accounting period.
Score:1/1

6.

An estimate based on an analysis of receivables shows that $780 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. After preparing the adjusting entry at the end of the year, the balance in the Uncollectible Accounts Expense is
Student ResponseValueCorrect AnswerFeedback
$780
$670
Student Response $890100%Student Response
$110
Score:1/1

7.

A 60-day, 12% note receivable for $20,000, dated May 20, is discounted at the bank on June 9 at 15%. The number of days in the discount period is 20.
Student ResponseValueCorrect AnswerFeedback
Student Response False100%Student Response
True
Score:1/1

8.

The discounting of a note receivable creates a contingent liability that continues in effect until the due date of the note.
Student ResponseValueCorrect AnswerFeedback
False
Student Response True100%Student Response
Score:1/1

9.

At the end of a period, before the accounts are adjusted, Allowance for Doubtful Accounts has a credit balance of $5,000. If the estimate of uncollectible accounts determined by aging the receivables is $50,000, the current provision to be made for uncollectible accounts expense is $45,000.
Student ResponseValueCorrect AnswerFeedback
Student Response True100%Student Response
False
Score:1/1

10.

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
Student ResponseValueCorrect AnswerFeedback
debit Bad Debt Expense and credit Accounts Receivable.
debit Bad Debt Expense and credit Allowance for Doubtful Accounts.
debit Allowance for Doubtful Accounts and credit Bad Debt Expense.
Student Response debit Allowance for Doubtful Accounts and credit Accounts Receivable.100%Student Response
Score:1/1

11.

A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. The maturity value of the note is
Student ResponseValueCorrect AnswerFeedback
$10,000
$9,800
$200
Student Response $10,200100%Student Response
Score:1/1

12.

When a note is written to settle an open account, no entry is necessary.
Student ResponseValueCorrect AnswerFeedback
True
Student Response False100%Student Response
Score:1/1

13.

The journal entry to record a note received from a customer to apply on account is
Student ResponseValueCorrect AnswerFeedback
debit Accounts Receivable; credit Notes Receivable
debit Cash; credit Notes Receivable
Student Response debit Notes Receivable; credit Accounts Receivable100%Student Response
debit Notes Receivable; credit Notes Payable
Score:1/1

14.

Allowance for Doubtful Accounts has a debit balance of $800 at the end of the year (before adjustment), and an analysis of accounts in the customers ledger indicates doubtful accounts of $15,000. Which of the following entries records the proper provision for doubtful accounts?
Student ResponseValueCorrect AnswerFeedback
debit Uncollectible Accounts Expense, $15,800; credit Allowance for Doubtful Accounts, $15,800Student Response
Student Response debit Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts, $14,2000%
debit Allowance for Doubtful Accounts, $800; credit Uncollectible Accounts Expense, $800
debit Uncollectible Accounts Expense, $800; credit Allowance for Doubtful Accounts, $800
Score:0/1

15.

Harper Company lends Hewell Company $40,000 on March 1, accepting a four-month, 6% interest note. Harper Company prepares financial statements on March 31. What adjusting entry should be made before the financial statements can be prepared?
Student ResponseValueCorrect AnswerFeedback
Interest Receivable 200
Interest Revenue 200
Student Response
Student Response Interest Receivable 800
Interest Revenue 800
0%
Cash 200
Interest Revenue 200
Note Receivable 40,000
Cash 40,000
Score:0/1

16.

What is the type of account and normal balance of Allowance for Doubtful Accounts?
Student ResponseValueCorrect AnswerFeedback
Asset, debit
Student Response Contra asset, credit100%Student Response
Contra asset, debit
Liability, credit
Score:1/1

17.

A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. If the note is discounted on May 21 at 15%, the proceeds are
Student ResponseValueCorrect AnswerFeedback
$170
$10,000
Student Response $10,030100%Student Response
$9,830
Score:1/1

18.

One of the weaknesses of the direct write-off method is that it
Student ResponseValueCorrect AnswerFeedback
is too difficult to use for many companies
understates accounts receivable on the balance sheet
is based on estimates
Student Response violates the matching principle100%Student Response
Score:1/1

19.

When does an account become uncollectible?
Student ResponseValueCorrect AnswerFeedback
at the end of the fiscal year
when the debtor fails to pay a note on the due date
Student Response there is no general rule for when an account becomes uncollectible100%Student Response
when the debtor fails to pay an account according to a sales contract
Score:1/1

20.

Both Accounts Receivable and Notes Receivable represent claims that are expected to be collected in cash.
Student ResponseValueCorrect AnswerFeedback
Student Response True100%Student Response
False
Score:1/1

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