Question 1

Under the allowance method for uncollectible accounts, the net realizable value of receivables is the same both before and after an account has been written off.

Accepted Answer

A) True 
 B)False  True

Question 2

The collection of an account that had been previously written off under the allowance method for uncollectible accounts

Accepted Answer

A)  will increase profit in the period it is collected.
B)  will decrease profit in the period it is collected.
C)  requires a correcting entry for the period in which the account was written off.
D)  does not affect profit in the period it is collected. D

Question 3

When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when

Accepted Answer

A)  a sale is made.
B)  an account becomes uncollectible and is written off.
C)  management estimates the amount of uncollectible accounts.
D)  a customer's account becomes past due. C

Question 4

The journal entry to record a credit card sale using a nonbank credit card (e.g., Canadian Tire or Sears) includes a debit to the

Accepted Answer

A)  Cash account.
B)  Accounts Receivable account.
C)  Debit Card Expense account.
D)  Sales account.

Question 5

Day Corp receives a $9,000, 8-month, 6% note from Night Corp in settlement of a past due account receivable. What entry will Day Corp make upon receiving the note?

Accepted Answer

The answer of Day Corp receives a $9,000, 8-month, 6%...

Question 6

Which of the following is not true regarding promissory notes?

Accepted Answer

A)  Promissory notes are not shown at net realizable value on the statement of financial position.
B)  Promissory notes are usually interest-bearing.
C)  Promissory notes give a stronger legal claim to the holder than accounts receivable.
D)  Promissory notes are frequently accepted from customers who need to extend the payment of an outstanding account receivable.

Question 7

When a subsidiary ledger and a control account are used, each journal entry that affects accounts receivable must be posted twice.

Accepted Answer

A) True 
 B)False

Question 8

Use the following information for questions 
Under the aging of a company's accounts receivable, the uncollectible accounts are estimated to be $24,000. The unadjusted balance for the Allowance for Doubtful Accounts is $8,000 credit.
-What is the balance in the Allowance for Doubtful Accounts account after adjustment?

Accepted Answer

A)  $32,000
B)  $24,000
C)  $16,000
D)  $ 8,000

Question 9

The receivables turnover should be analyzed in conjunction with other ratios such as the current ratio and inventory turnover.

Accepted Answer

A) True 
 B)False

Question 10

The net amount expected to be received in cash from receivables is termed the

Accepted Answer

A)  net realizable value.
B)  fair value.
C)  gross cash value.
D)  cash-equivalent value.

Question 11

The maker of a promissory note is the party to whom the payment is to be made.

Accepted Answer

A) True 
 B)False

Question 12

The receivables turnover ratio is used to analyze

Accepted Answer

A)  profitability.
B)  liquidity.
C)  risk.
D)  solvency.

Question 13

Under the allowance method of accounting for uncollectible accounts, Bad Debts Expense is debited

Accepted Answer

A)  when a credit sale is past due.
B)  at the end of each accounting period.
C)  whenever a pre-determined amount of credit sales have been made.
D)  when an account is determined to be uncollectible.

Question 14

Under the allowance method for uncollectible accounts, bad debts expense is not recorded until a customer defaults.

Accepted Answer

A) True 
 B)False

Question 15

A note receivable is a written promise by the maker to the payee to pay a specified amount of money at a definite time.

Accepted Answer

A) True 
 B)False

Question 16

A debit balance in the Allowance for Doubtful Accounts

Accepted Answer

A)  is the normal balance for that account.
B)  indicates that actual bad debt write-offs are higher than previous provisions for bad debts.
C)  indicates that actual bad debt write-offs have been less than what was estimated.
D)  cannot occur if the percentage of receivables method of estimating bad debts is used.

Question 17

Allowance for Doubtful Accounts is credited when an account is determined to be uncollectible.

Accepted Answer

A) True 
 B)False

Question 18

The two accounting problems with accounts receivable are: (1) recognizing and (2) disposing.

Accepted Answer

A) True 
 B)False

Question 19

Bad Debts Expense is reported on the income statement as

Accepted Answer

A)  part of cost of goods sold.
B)  an expense subtracted from gross sales to determine net sales.
C)  an operating expense.
D)  a non-operating expense.

Question 20

Receivables might be sold to

Accepted Answer

A)  lengthen the cash-to-cash operating cycle.
B)  take advantage of deep discounts on the net realizable value of receivables.
C)  generate cash quickly.
D)  finance companies at an amount greater than net realizable value.

Exam 8: Reporting and Analyzing Receivables

Under the allowance method for uncollectible accounts, the net realizable value of receivables is the same both before and after an account has been written off.

The collection of an account that had been previously written off under the allowance method for uncollectible accounts

When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when

The journal entry to record a credit card sale using a nonbank credit card (e.g., Canadian Tire or Sears) includes a debit to the

Day Corp receives a $9,000, 8-month, 6% note from Night Corp in settlement of a past due account receivable. What entry will Day Corp make upon receiving the note?

Which of the following is not true regarding promissory notes?

When a subsidiary ledger and a control account are used, each journal entry that affects accounts receivable must be posted twice.

The receivables turnover should be analyzed in conjunction with other ratios such as the current ratio and inventory turnover.

The net amount expected to be received in cash from receivables is termed the

The maker of a promissory note is the party to whom the payment is to be made.

The receivables turnover ratio is used to analyze

Under the allowance method of accounting for uncollectible accounts, Bad Debts Expense is debited

Under the allowance method for uncollectible accounts, bad debts expense is not recorded until a customer defaults.

A note receivable is a written promise by the maker to the payee to pay a specified amount of money at a definite time.

A debit balance in the Allowance for Doubtful Accounts

Allowance for Doubtful Accounts is credited when an account is determined to be uncollectible.

The two accounting problems with accounts receivable are: (1) recognizing and (2) disposing.

Bad Debts Expense is reported on the income statement as

Receivables might be sold to