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 Response Value Correct Answer Feedback 1. there is no effect on total current assets or total expenses 100% 2. total current assets are reduced and total expenses are increased 3. total current assets are reduced 4. 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 Response Value Correct Answer Feedback 1. cost method 2. interest method 3. equity method 4. direct write-off method 100% Score: 1/1
3.
	Allowance for Doubtful Accounts is listed on the balance sheet under the caption Student Response Value Correct Answer Feedback 1. fixed assets 2. stockholders’ equity 3. current assets 100% 4. investments Score: 1/1
4.
	When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when Student Response Value Correct Answer Feedback 1. a sale is made. 2. a customer's account becomes past due. 3. management estimates the amount of uncollectibles. 100% 4. 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 Response Value Correct Answer Feedback 1. when an account is determined to be worthless. 100% 2. when a credit sale is past due. 3. whenever a pre-determined amount of credit sales have been made. 4. 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 Response Value Correct Answer Feedback 1. $780 2. $670 3. $890 100% 4. $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 Response Value Correct Answer Feedback 1. False 100% 2. 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 Response Value Correct Answer Feedback 1. False 2. True 100% 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 Response Value Correct Answer Feedback 1. True 100% 2. 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 Response Value Correct Answer Feedback 1. debit Bad Debt Expense and credit Accounts Receivable. 2. debit Bad Debt Expense and credit Allowance for Doubtful Accounts. 3. debit Allowance for Doubtful Accounts and credit Bad Debt Expense. 4. debit Allowance for Doubtful Accounts and credit Accounts Receivable. 100% 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 Response Value Correct Answer Feedback 1. $10,000 2. $9,800 3. $200 4. $10,200 100% Score: 1/1
12.
	When a note is written to settle an open account, no entry is necessary. Student Response Value Correct Answer Feedback 1. True 2. False 100% Score: 1/1
13.
	The journal entry to record a note received from a customer to apply on account is Student Response Value Correct Answer Feedback 1. debit Accounts Receivable; credit Notes Receivable 2. debit Cash; credit Notes Receivable 3. debit Notes Receivable; credit Accounts Receivable 100% 4. 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 Response Value Correct Answer Feedback 1. debit Uncollectible Accounts Expense, $15,800; credit Allowance for Doubtful Accounts, $15,800 2. debit Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts, $14,200 0% 3. debit Allowance for Doubtful Accounts, $800; credit Uncollectible Accounts Expense, $800 4. 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 Response Value Correct Answer Feedback 1. Interest Receivable 200 Interest Revenue 200 2. Interest Receivable 800 Interest Revenue 800 0% 3. Cash 200 Interest Revenue 200 4. 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 Response Value Correct Answer Feedback 1. Asset, debit 2. Contra asset, credit 100% 3. Contra asset, debit 4. 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 Response Value Correct Answer Feedback 1. $170 2. $10,000 3. $10,030 100% 4. $9,830 Score: 1/1
18.
	One of the weaknesses of the direct write-off method is that it Student Response Value Correct Answer Feedback 1. is too difficult to use for many companies 2. understates accounts receivable on the balance sheet 3. is based on estimates 4. violates the matching principle 100% Score: 1/1
19.
	When does an account become uncollectible? Student Response Value Correct Answer Feedback 1. at the end of the fiscal year 2. when the debtor fails to pay a note on the due date 3. there is no general rule for when an account becomes uncollectible 100% 4. 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 Response Value Correct Answer Feedback 1. True 100% 2. False Score: 1/1