Question 1

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 2

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 3

Complete the following table, indicating whether the transaction would: I - improve, W - worsen or NE - have no effect on the items noted.

Accepted Answer

The answer of Complete the following table, indicating whether the...

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

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 6

Which of the following receivables would not be classified as an "other receivable"?

Accepted Answer

A)  advance to an employee 
B)  refundable income tax 
C)  notes receivable 
D)  interest receivable

Question 7

The balance in Allowance for Doubtful Accounts would have a debit balance when

Accepted Answer

A)  the percentage of receivables basis is used. 
B)  an uncollectible account is later recovered. 
C)  write offs during the year have been less than previous provisions. 
D)  write offs during the year have exceeded previous provisions.

Question 8

Under the allowance method for uncollectible accounts,

Accepted Answer

A)  the recovery of an account receivable previously written off results in a credit to the Bad Debt Expense account. 
B)  Bad Debts Expense is debited when an account is deemed uncollectible and must be written off. 
C)  the carrying value of receivables is the same both before and after an account has been written off. 
D)  the carrying amount of receivables is the same both before and after an account that had previously been written off is recovered.

Question 9

Record the following transactions for Lucea Corporation:Jul 1 Received an $8,000, 3%, 3-month note, dated July 1, from Frank Baker in payment of his open account. Interest is due at maturity.Oct 1 Received notification from Frank Baker that he is unable to honour his note at this time. It is expected that Baker will pay at a later date.Nov 15 Received full payment from Frank Baker for note receivable previously dishonoured.

Accepted Answer

The answer of Record the following transactions for Lucea Corporation:Jul...

Question 10

It is possible for the allowance account to have a debit balance before the year-end adjusting entry is recorded.

Accepted Answer

A) True 
 B)False

Question 11

Under the allowance method for uncollectible accounts, Bad Debts Expense is recorded

Accepted Answer

A)  when an individual account is written off. 
B)  when the amount of loss is known. 
C)  for an amount that the company estimates it will not collect. 
D)  several times during the accounting period.

Question 12

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 13

The Allowance for Doubtful Accounts is shown under

Accepted Answer

A)  Expenses on the income statement. 
B)  Revenue on the income statement. 
C)  Current Liabilities on the statement of financial position. 
D)  Current Assets on the statement of financial position.

Question 14

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 15

Copeland Industries has the following transactions related to notes receivable during the last month of the year:Dec 1 Lent $75,000 cash to P. Arthur on a 1-year, 6% note. Interest is due the first of each month, commencing January 1.15 Sold goods to F. Murdoch, receiving a $12,000, 4-month, 4% note. Interest is due the 15 of each month, commencing January 15. Copeland uses the periodic inventory method.31 Accrued interest revenue on notes receivable.InstructionsRecord the above transactions for Greenland Distributors.

Accepted Answer

The answer of Copeland Industries has the following transactions related...

Question 16

Under the allowance method for uncollectible accounts

Accepted Answer

A)  the carrying amount of accounts receivable is greater before an account is written off than after it is written off. 
B)  Bad Debts Expense is debited when a specific account is written off as uncollectible. 
C)  the carrying amount of accounts receivable in the statement of financial position is the same before and after an account is written off. 
D)  Allowance for Doubtful Accounts is closed each year to Income Summary.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 19

Broadway Limited had an $800 credit balance in Allowance for Doubtful Accounts at December 31, 2018, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following:  Instructions 
a. Prepare the adjusting entry at December 31, 2018, to recognize bad debts expense.
b. Assume the same facts as above except that the Allowance for Doubtful Accounts account had an $800 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's bad debts.

Accepted Answer

The answer of Broadway Limited had an $800 credit balance...

Question 20

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.

Exam 8: Reporting and Analyzing Receivables

Bad Debts Expense is considered

Bad Debts Expense is reported on the income statement as

Complete the following table, indicating whether the transaction would: I - improve, W - worsen or NE - have no effect on the items noted.

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

A debit balance in the Allowance for Doubtful Accounts

Which of the following receivables would not be classified as an "other receivable"?

The balance in Allowance for Doubtful Accounts would have a debit balance when

Under the allowance method for uncollectible accounts,

It is possible for the allowance account to have a debit balance before the year-end adjusting entry is recorded.

Under the allowance method for uncollectible accounts, Bad Debts Expense is recorded

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 Allowance for Doubtful Accounts is shown under

Allowance for Doubtful Accounts on the statement of financial position

Under the allowance method for uncollectible accounts

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

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

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