Deck 8: Receivables

Question 1

The two major types of receivables are accounts receivable and notes receivable.

Answer 1

True

Question 2

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.

Answer 2

C

Question 3

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.

Answer 3

B

Question 4

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.

Question 5

Notes receivable are usually longer in term than accounts receivable.

Question 6

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.

Question 7

The aging-of-accounts-receivable method computes uncollectible accounts expense as a percentage of net credit sales.

Question 8

The income statement approach computes uncollectible accounts expense as a percentage of net credit sales.

Question 9

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

Question 10

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.

Question 11

The creditor is the entity that signs a note.

Question 12

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.

Question 13

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.

Question 14

The income statement approach computes uncollectible accounts expense by analyzing accounts receivable.

Question 15

The allowance method is a method of recording collection losses by estimating uncollectible amounts.

Question 16

Which of the following is included in the category Other receivables?

A) Loans to employees
B) Accounts receivables
C) Notes receivables
D) Investments

Question 17

The aging method is a balance sheet approach of estimating uncollectible accounts.

Question 18

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

Question 19

The two major types of receivables are interest receivable and taxes receivable.

Question 20

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.

Question 21

The following information is from the 2013 records of Armadillo Camera Shop: $$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31,2013 } & \$ 20,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December 31,2013 } \\\text { prior to adjustment }\end{array} & 600 \text { (debit) } \\\hline \text { Net credit sales for 2013 } & 95,000 \\\hline \text { Accounts written off as uncollectible during 2013 } & 7,000 \\\hline \text { Cash sales during 2013 } & 27,000 \\\hline\end{array}$$

- 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

Question 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 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

Question 23

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

Question 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 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

Question 25

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

Question 26

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 account expense reported on the income statement?

A) $14,900
B) $15,000
C) $14,100
D) $15,900

Question 27

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

Question 28

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

Question 29

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.

Question 30

The following information is from the 2013 records of Armadillo Camera Shop: $$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31,2013 } & \$ 20,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December 31,2013 } \\\text { prior to adjustment }\end{array} & 600 \text { (debit) } \\\hline \text { Net credit sales for 2013 } & 95,000 \\\hline \text { Accounts written off as uncollectible during 2013 } & 7,000 \\\hline \text { Cash sales during 2013 } & 27,000 \\\hline\end{array}$$

-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

Question 31

The following information is from the 2013 records of Armadillo Camera Shop: $$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31,2013 } & \$ 20,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December 31,2013 } \\\text { prior to adjustment }\end{array} & 600 \text { (debit) } \\\hline \text { Net credit sales for 2013 } & 95,000 \\\hline \text { Accounts written off as uncollectible during 2013 } & 7,000 \\\hline \text { Cash sales during 2013 } & 27,000 \\\hline\end{array}$$

- 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

Question 32

The following information is from the 2013 records of Armadillo Camera Shop: $$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31,2013 } & \$ 20,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December 31,2013 } \\\text { prior to adjustment }\end{array} & 600 \text { (debit) } \\\hline \text { Net credit sales for 2013 } & 95,000 \\\hline \text { Accounts written off as uncollectible during 2013 } & 7,000 \\\hline \text { Cash sales during 2013 } & 27,000 \\\hline\end{array}$$

- 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

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

The following information is from the 2013 records of Armadillo Camera Shop: $$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31,2013 } & \$ 20,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December 31,2013 } \\\text { prior to adjustment }\end{array} & 600 \text { (debit) } \\\hline \text { Net credit sales for 2013 } & 95,000 \\\hline \text { Accounts written off as uncollectible during 2013 } & 7,000 \\\hline \text { Cash sales during 2013 } & 27,000 \\\hline\end{array}$$

- 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

Question 39

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

Question 40

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

Question 41

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

Question 42

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: $\begin{array}{|l|r|r|r|r|r|}\hline\text { Customer } & 1-30 \text { Days } & 31-60 \text { Days } & 61-90 \text { Days } & \begin{array}{c}\text { Over } 90 \\\text { Days }\end{array} & \text { Total Balance }\\\hline \text { Johnson } & \$ 4,600 & \$ 3,200 & & & \$ 7,800 \\\hline \text { Hot Pots, Inc. } & & & 800 & 1,000 & 1,800 \\\hline \text { Potter } & 40,000 & 550 & & & 40,550 \\\hline \text { Harrison } & & 3,600 & 900 & & 4,500 \\\hline \text { Marz } & & & 2,000 & 50 & 2,050 \\\hline \text { Younger } & 65,000 & & & & 65,000 \\\hline \text { Merry Maids } & 5,900 & & & & 5,900 \\\hline \text { Acher } & 12,000 & 6,400 & & & 18,400 \\\hline \text { Totals } & \$ 127,500 & \$ 13,750 & \$ 3,700 & \$ 1,050 & \$ 146,000 \\\hline \begin{array}{l}\text { Uncollectible percentage }\end{array} & 2 \% & 10 \% & 20 \% & 40 \% & \\\hline \begin{array}{l}\text { Estimated uncollectible } \\\text { amount }\end{array} & \$ 2,550 & \$ 1,375 & \$ 740 & \$ 420 & \$ 5,085 \\\hline\end{array}$


- 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.

Question 43

On January 1,Wolfie's Supply sold $222 worth of goods to customer Abe Smith on account.Please record the journal entry for the sales revenue.

Question 44

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.

-
After the year-end entry to adjust the Uncollectible accounts expense,what is the ending balance in the Allowance for uncollectible accounts?

A) Debit of $1,400
B) Credit of $1,944
C) Debit of $1,144
D) Credit of $544

Question 45

On January 1,Wolfie's Supply sold $222 worth of goods to customer Abe Smith on account.On January 12,Wolfie's collected the amount from the customer.Please record the journal entry for the cash collection.

Question 46

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.

-
After the year-end entry to adjust the Uncollectible accounts expense,what is the ending balance in the Uncollectible accounts expense?

A) Debit of $1,400
B) Credit of $1,944
C) Debit of $1,144
D) Credit of $544

Question 47

At January 1,Everbright Sales has the following balances: During the year,Everbright has $150,000 of credit sales,collections of $140,000,and write-offs of $3,000.Everbright records Uncollectible accounts expense at the end of the year using the aging method.At the end of the year,the aging analysis produces a figure of $1,900,being the estimate of uncollectible accounts at end of year.

- After the year-end entry to adjust the Uncollectible accounts expense is made,what is the final balance in the Uncollectible accounts expense?

A) Debit of $3,700
B) Credit of $4,200
C) Debit of $1,900
D) Debit of $3,000

Question 48

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

Question 49

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: $\begin{array}{|l|r|r|r|r|r|}\hline\text { Customer } & 1-30 \text { Days } & 31-60 \text { Days } & 61-90 \text { Days } & \begin{array}{c}\text { Over } 90 \\\text { Days }\end{array} & \text { Total Balance }\\\hline \text { Johnson } & \$ 4,600 & \$ 3,200 & & & \$ 7,800 \\\hline \text { Hot Pots, Inc. } & & & 800 & 1,000 & 1,800 \\\hline \text { Potter } & 40,000 & 550 & & & 40,550 \\\hline \text { Harrison } & & 3,600 & 900 & & 4,500 \\\hline \text { Marz } & & & 2,000 & 50 & 2,050 \\\hline \text { Younger } & 65,000 & & & & 65,000 \\\hline \text { Merry Maids } & 5,900 & & & & 5,900 \\\hline \text { Acher } & 12,000 & 6,400 & & & 18,400 \\\hline \text { Totals } & \$ 127,500 & \$ 13,750 & \$ 3,700 & \$ 1,050 & \$ 146,000 \\\hline \begin{array}{l}\text { Uncollectible percentage }\end{array} & 2 \% & 10 \% & 20 \% & 40 \% & \\\hline \begin{array}{l}\text { Estimated uncollectible } \\\text { amount }\end{array} & \$ 2,550 & \$ 1,375 & \$ 740 & \$ 420 & \$ 5,085 \\\hline\end{array}$


-How much will the Uncollectible account expense for the year be?

A) $2,550
B) $1,115
C) $5,085
D) $11,285

Question 50

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

Question 51

At January 1,Everbright Sales has the following balances: During the year,Everbright has $150,000 of credit sales,collections of $140,000,and write-offs of $3,000.Everbright records Uncollectible accounts expense at the end of the year using the aging method.At the end of the year,the aging analysis produces a figure of $1,900,being the estimate of uncollectible accounts at end of year.

-Before the year-end entry to adjust the Uncollectible accounts expense is made,what is the balance in the Uncollectible accounts expense?

A) Debit of $1,400
B) Credit of $1,944
C) Zero balance
D) Credit of $544

Question 52

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

Question 53

At January 1,Everbright Sales has the following balances: During the year,Everbright has $150,000 of credit sales,collections of $140,000,and write-offs of $3,000.Everbright records Uncollectible accounts expense at the end of the year using the aging method.At the end of the year,the aging analysis produces a figure of $1,900,being the estimate of uncollectible accounts at end of year.

- After the year-end entry to adjust the Uncollectible accounts expense is made,what is the final balance in the Allowance for uncollectible accounts?

A) Debit of $1,800
B) Credit of $4,200
C) Credit of $1,900
D) Debit of $3,000

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

At January 1,Everbright Sales has the following balances: During the year,Everbright has $150,000 of credit sales,collections of $140,000,and write-offs of $3,000.Everbright records Uncollectible accounts expense at the end of the year using the aging method.At the end of the year,the aging analysis produces a figure of $1,900,being the estimate of uncollectible accounts at end of year.

- Before the year-end entry to adjust the Uncollectible accounts expense is made,what is the balance in the Allowance for uncollectible accounts?

A) Debit of $1,800
B) Credit of $4,200
C) Zero balance
D) Debit of $3,000

Question 60

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

Question 61

Which of the following entries would be used to account for uncollectible receivables using the direct write-off method?

A) Uncollectible accounts expense is debited and Accounts receivable is credited.
B) Allowance for uncollectible accounts is debited and Uncollectible accounts expense is credited.
C) Accounts receivable is debited and Uncollectible accounts expense is credited.
D) Uncollectible accounts expense is debited and Allowance for uncollectible accounts is credited.

Question 62

On January 1,Wolfie's Supply sold $222 worth of goods to customer Abe Smith on account.For several months,Wolfie's tried unsuccessfully to collect from the customer,and finally decided to write off the account.(Wolfie's uses the allowance method.)
Later in the year,however,the customer came in to Wolfie's,apologized for the late payment and handed over a check for $222.To properly record the recovery of an account previously written off,two journal entries are needed-one to restore the receivable previously written off,and one to record the cash receipt.Please show the first of these two entries.

Question 63

A company uses the direct write-off method to account for uncollectible receivables.Uncollectible account expense will be estimated as a percentage of sales.

Question 64

The direct write-off method requires an entry with a credit to Accounts receivable to record the uncollectible accounts expense.

Question 65

The following information is from the 2013 records of Armadillo Camera Shop: $$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31,2013 } & \$ 20,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December 31,2013 } \\\text { prior to adjustment }\end{array} & 600 \text { (debit) } \\\hline \text { Net credit sales for 2013 } & 95,000 \\\hline \text { Accounts written off as uncollectible during 2013 } & 7,000 \\\hline \text { Cash sales during 2013 } & 27,000 \\\hline\end{array}$$ 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 Net accounts receivable after adjustment?

A) $17,750
B) $17,150
C) $16,550
D) $13,000

Question 66

Under the direct write-off method,a customer who doesn't pay their bills is written off with what journal entry?

A) Debit Accounts receivable and credit Uncollectible account expense
B) Debit Uncollectible account expense and credit Cash
C) Debit Uncollectible account expense and credit Accounts receivable
D) Debit Lost revenue and credit Accounts receivable

Question 67

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.Show the journal entry required to record Uncollectible account expense at the end of the year.

Question 68

A company has significant uncollectible receivables.Why is the direct write-off method unacceptable?

A) Assets will be understated on the balance sheet.
B) It violates the matching principle.
C) Direct write-offs would be immaterial.
D) It is not allowed for tax reasons.

Question 69

The following information is from the 2013 records of Armadillo Camera Shop: $\begin{array}{|l|r|}\hline\text { Accounts receivable, December 31,2013 } & \$ 20,000 \text { (debit) } \\\hline \text { Net credit sales for 2013 } & 95,000 \\\hline \text { Accounts written off as uncollectible during 2013 } & 7,000 \\\hline \text { Cash sales during 2013 } & 27,000 \\\hline\end{array}$ Uncollectible accounts expense is determined by the direct write-off method.Which of the following will be the amount of Uncollectible accounts expense?

A) $2,250
B) $3,450
C) $7,000
D) $2,850

Question 70

Perry Materials Supply uses the aging method to account for uncollectible accounts.At the end of the year,the balance in Accounts receivable was $146,000 and Perry prepared the following aging schedule. $\begin{array}{|l|r|r|r|r|r|} \hline \text { Customer } & \text { 1-30 Days } & \text { 31-60 Days } & \text { 61-90 Days } & \begin{array}{c}\text { Over } 90 \\\text { Days }\end{array} & \begin{array}{c}\text { Total } \\\text { Balance }\end{array}\\\hline \text { Johnson } & \$ 4,600 & \$ 3,200 & & & \$ 7,800 \\\hline \text { Hot Pots, Inc. } & & & \$ 800 & \$ 1,000 & 1,800 \\\hline \text { Potter } & 40,000 & 550 & & & 40,550 \\\hline \text { Harrison } & & 3,600 & 900 & & 4,500 \\\hline \text { Marx } & & & 2,000 & 50 & 2,050 \\\hline \text { Younger } & 65,000 & & & & 65,000 \\\hline \text { Merry Maids } & 5,900 & & & & 5,900 \\\hline \text { Acher } & 12,000 & 6,400 & & & 18,400 \\\hline \text { Total } & \$ 127,500 & \$ 13,750 & \$ 3,700 & \$ 1,050 & \$ 146,000 \\\hline \text { Uncollectible percentage } & & & & & \\\hline \text { Estimated uncollectible amount } & & & & & \\\hline\end{array}$

Based on past history,Perry uses 2% for current receivables (1-30 days),10% for 31-60 days,20% for 61-90 days,and 40% for over 90 days.Please complete the schedule and calculate the estimated amount of Uncollectible accounts.

Question 71

On January 1,Wolfie's Supply sold $222 worth of goods to customer Abe Smith on account.For several months Wolfie's tried unsuccessfully to collect from the customer,and finally decided to write off the account.Please record the journal entry for the write-off.(Wolfie's uses the allowance method.)

Question 72

Archer Company and Zorro Company both have significant amounts of accounts receivable at any time,and both experience uncollectible accounts from time to time.Archer uses the percent-of-sales method to account for uncollectible accounts,and Zorro uses the direct write-off method.Archer Company's method complies with GAAP and produces a better matching of revenues and expenses than does Zorro Company's method.

Question 73

On January 1,Wolfie's Supply sold $222 worth of goods to customer Abe Smith on account.For several months,Wolfie's tried unsuccessfully to collect from the customer,and finally decided to write off the account.(Wolfie's uses the allowance method.)
Later in the year,however,the customer came in to Wolfie's,apologized for the late payment and handed over a check for $222.To properly record the recovery of an account previously written off,two journal entries are needed-one to restore the receivable previously written off,and one to record the cash receipt.Please show the second of these two entries.

Question 74

The direct write-off method conforms to the matching principle better than the allowance method.

Question 75

The direct write-off method is used primarily by large,publicly owned companies.

Question 76

The direct write-off method would be considered acceptable if uncollectible receivables are very low.

Question 77

Companies that use GAAP accounting will prefer the use of the direct write-off method.

Question 78

Archer Company and Zorro Company both have significant amounts of accounts receivable at any time,and both experience uncollectible accounts from time to time.Archer uses the aging method to account for uncollectible accounts,and Zorro uses the direct write-off method.Zorro Company's method complies with GAAP and produces a better matching of revenues and expenses than does Archer Company's method.

Question 79

A company uses the direct write-off method to account for uncollectible receivables.Which of the following is included in the entry to write off an uncollectible account?

A) A debit to Uncollectible account expense
B) A debit to the customer's Account receivable
C) A credit to the Allowance for uncollectible accounts
D) No entry is made to write off uncollectible accounts.

Question 80

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.Show the journal entry required to record Uncollectible account expense at the end of the year.