Question 1

Allowance for Doubtful Accounts is a contra account that is deducted from Accounts Receivable on the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 2

Under the allowance method for uncollectible accounts,

Accepted Answer

A) bad debts expense is not recorded until a customer defaults. 
B) the entry to write off an uncollectible account only involves statement of financial position accounts. 
C) allowance for doubtful accounts increases, while accounts receivables decrease when writing off an uncollectible account. 
D) bad debt expense increases, while allowance for doubtful accounts decreases when writing off an uncollectible account.

Question 3

When a note is dishonoured (but eventual collection is expected), the payee's entry includes a

Accepted Answer

A) debit to Cash. 
B) credit to Accounts Receivable. 
C) debit to Interest Expense. 
D) credit to Notes Receivable.

Question 4

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.

Question 5

When a company receives an interest-bearing note receivable, it will

Accepted Answer

A) debit Notes Receivable for the maturity value of the note. 
B) credit Notes Receivable for the maturity value of the note. 
C) debit Notes Receivable for the principal value of the note. 
D) credit Notes Receivable for the principal value of the note.

Question 6

The maturity value of a $20,000, 6%, 4-month note receivable dated July 3, with interest due at maturity, is

Accepted Answer

A) $400. 
B) $20,000. 
C) $20,400. 
D) $21,200.

Question 7

The term "receivables" refers to

Accepted Answer

A) amounts due from individuals or companies. 
B) merchandise to be collected from individuals or companies. 
C) cash to be paid to creditors. 
D) cash to be paid to debtors.

Question 8

A receivable is recognized

Accepted Answer

A) when the sales effort is substantially complete. 
B) regardless of collection risk. 
C) only when payment has been received. 
D) when a service is performed.

Question 9

Allowance for Doubtful Accounts on the statement of financial position

Accepted Answer

A) is included in current liabilities. 
B) increases the carrying amount of accounts receivable. 
C) appears under the heading "Other Assets." 
D) is deducted from accounts receivable.

Question 10

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 has been made. 
D) when an account is determined to be uncollectible.

Question 11

When posting is up-to-date, the balance in the accounts receivable subsidiary ledger must equal the balance in the general ledger.

Accepted Answer

A) True 
 B)False

Question 12

Under the allowance method for uncollectible accounts, writing off an uncollectible account

Accepted Answer

A) affects only statement of financial position accounts. 
B) affects both statement of financial position and statement of income accounts. 
C) affects only statement of income accounts. 
D) affects either statement of financial position or statement of income accounts.

Question 13

The percentage of receivables basis of estimating uncollectible accounts ignores the existing balance in the allowance account when the bad debts adjusting entry is recorded.

Accepted Answer

A) True 
 B)False

Question 14

The total interest owing on a $6,000, 4%, 2-month note receivable is

Accepted Answer

A) $20. 
B) $40. 
C) $240. 
D) $6,040.

Question 15

Estimated uncollectible accounts are recorded as a debit to

Accepted Answer

A) Allowance for Doubtful Accounts. 
B) Bad Debts Expense. 
C) Sales. 
D) Accounts Receivable.

Question 16

When an account becomes uncollectible and must be written off

Accepted Answer

A) Allowance for Doubtful Accounts should be credited. 
B) Accounts Receivable should be credited. 
C) Bad Debts Expense should be credited. 
D) Sales should be debited.

Question 17

Bad Debts Expense is considered

Accepted Answer

A) an avoidable cost in doing business on a credit basis. 
B) an internal control weakness. 
C) a necessary risk of doing business on a credit basis. 
D) avoidable unless there is a recession.

Question 18

Which of the following statements is false?

Accepted Answer

A) A subsidiary ledger is a group of accounts that provides details about a control account in the general ledger. 
B) When a subsidiary ledger and a control account are used, each journal entry that affects accounts receivable must be posted twice. 
C) The balance in the control account must always equal the total of the subsidiary ledger. 
D) A subsidiary ledger includes supporting detail to the general ledger.

Question 19

Other receivables include nontrade receivables such as loans to company officers.

Accepted Answer

A) True 
 B)False

Question 20

A dishonoured note receivable

Accepted Answer

A) is paid in full at its maturity date. 
B) is no longer a negotiable instrument. 
C) can be used in place of a cheque. 
D) can only be collected by a bank.

Exam 8: Reporting and Analyzing Receivables

Allowance for Doubtful Accounts is a contra account that is deducted from Accounts Receivable on the statement of financial position.

Under the allowance method for uncollectible accounts,

When a note is dishonoured (but eventual collection is expected) , the payee's entry includes a

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

When a company receives an interest-bearing note receivable, it will

The maturity value of a $20,000, 6%, 4-month note receivable dated July 3, with interest due at maturity, is

The term "receivables" refers to

A receivable is recognized

Allowance for Doubtful Accounts on the statement of financial position

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

When posting is up-to-date, the balance in the accounts receivable subsidiary ledger must equal the balance in the general ledger.

Under the allowance method for uncollectible accounts, writing off an uncollectible account

The percentage of receivables basis of estimating uncollectible accounts ignores the existing balance in the allowance account when the bad debts adjusting entry is recorded.

The total interest owing on a $6,000, 4%, 2-month note receivable is

Estimated uncollectible accounts are recorded as a debit to

When an account becomes uncollectible and must be written off

Bad Debts Expense is considered

Which of the following statements is false?

Other receivables include nontrade receivables such as loans to company officers.

A dishonoured note receivable