Test bank accounting 25th editon warren chapter 9 receivables

Chapter 9--Receivables
Student: ___________________________________________________________________________
1. Notes Receivable and Accounts Receivable can also be called trade receivables.
True False

2. Receivables not currently collectible are reported in the investments section of the balance sheet.
True False

3. Trade receivables occur when two companies trade or exchange notes receivables.
True False

4. Other receivables include non trade receivables such as loans to company officers.
True False

5. Both Accounts Receivable and Notes Receivable represent claims that are expected to be collected in cash.
True False

6. When companies sell their receivables to other companies, the transaction is called factoring.
True False

7. Of the two methods of accounting for uncollectible receivables, the allowance method provides in advance
for uncollectible receivables.
True False

8. Generally accepted accounting principles do not normally allow the use of the direct write-off method of
accounting for uncollectible accounts.
True False


9. The direct write-off method records Bad Debt Expense in the year the specific account receivable is
determined to be uncollectible.

True False

10. When using the direct write-off method off accounting for uncollectible receivables, the account Allowance
for Doubtful Accounts is debited when a specific account is determined to be uncollectible.
True False

11. When an account receivable that has been written off is subsequently collected, the account receivable is
said to be reinstated.
True False

12. Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a
credit balance before adjusting entries are recorded at the end of the accounting period.
True False

13. Allowance for Doubtful Accounts is a liability account.
True False

14. When using the estimate based on sales method, the entry to record uncollectible accounts expense includes
a credit to the Accounts Receivable account.
True False

15. The difference between the balance in Accounts Receivable and the balance in the Allowance for Doubtful
Accounts is called the net realizable value.
True False

16. When the allowance method for accounting for uncollectible receivables is used, net income is reduced
when a specific receivable is written off.
True False

17. At the end of a period, (before adjustment), Allowance for Doubtful Accounts has a credit balance of
$250. The net credit sales for the period total $500,000. If the company estimates uncollectible accounts
expense at 1% of net credit sales, the amount of bad debt expense to be recorded in an adjusting entry is
$4,750.
True False

18. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of
$500. Net credit sales for the period totaled $800,000. If bad debt expense is estimated at 1% of net credit
sales, the amount of bad debt expense to be recorded in the adjusting entry is $8,500.
True False

19. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $2,000.
The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be
uncollectible is $15,000. The amount to be recorded in the adjusting entry for the bad debt expense is
$15,000.
True False

20. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a credit balance of
$5,000. The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be
uncollectible is $50,000. The amount to be recorded in the adjusting entry for the Bad Debt Expense is
$45,000.
True False

21. When using the analysis of receivables method for estimating uncollectible receivables, the amount
computed in the analysis is usually the amount that would be recorded in the end-of-period adjusting entry.
True False

22. The balance in the Allowance for Doubtful Accounts account at the end of the year includes the total of all
accounts written-off since the beginning year.
True False

23. When accounting for uncollectible receivables and using the percentage of sales method, the matching
principle is violated.
True False


24. A primary difference between the direct write-off and allowance method is whether or not bad debts is
based on a percentage of sales.
True False

25. The due date of a 60-day note dated July 10 is September 10.
True False

26. The maturity value of a 12%, 60-day note for $5,000 is $5,600.
True False

27. The maturity value of a note receivable is always the same as its face value.
True False

28. The interest on a 6%, 60-day note for $5,000 is $300.
True False

29. The party promising to pay a note at maturity is the maker.
True False

30. In computing the maturity date of a note, the date the note is issued is included but the due date is omitted.
True False

31. If a promissory note is dishonored, the payee should still record interest revenue.
True False

32. The equation for computing interest on an interest-bearing note is as follows: interest equals maturity value
times interest rate times time.
True False

33. If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.
True False


34. When a note is received from a customer on account, it is recorded by debiting Notes Receivable and
crediting Accounts Receivable.
True False

35. When a note is written to settle an open account, no entry is necessary.
True False

36. The balance of the Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet.
True False

37. Receivables that are expected to be collected in cash in eighteen months or less are reported in the Current
Asset section of the balance sheet.
True False

38. The accounts receivables turnover ratio is computed by dividing total gross sales by the average net
receivables during the year.
True False

39. The accounts receivable turnover measures the length of time in days it takes to collect a receivable.
True False

40. The number of days’ sales in receivables is an estimate of the length of time the accounts receivables have
been outstanding.
True False

41. A note receivable due in 18 months is listed on the balance sheet under the caption
A. long-term liabilities
B. fixed assets
C. current assets
D. investments


42. The receivable that is usually evidenced by a formal instrument of credit is a(n)
A. trade receivable.
B. note receivable.
C. accounts receivable.
D. income tax receivable.

43. Which of the following receivables would not be classified as an "other receivable”?
A. Advance to an employee
B. Interest receivable
C. Refundable income tax
D. Notes receivable

44. Notes or accounts receivables that result from sales transactions are often called
A. non-trade receivables.
B. trade receivables.
C. merchandise receivables.
D. sales receivables.

45. The term "receivables" includes all

A. money claims against other entities.
B. merchandise to be collected from individuals or companies.
C. cash to be paid to creditors.
D. cash to be paid to debtors.

46. When does an account become uncollectible?
A. when accounts receivable is converted into notes receivable
B. when discount is availed on notes receivable
C. there is no general rule for when an account becomes uncollectible
D. at the end of the fiscal year

47. The two methods of accounting for uncollectible receivables are the allowance method and the
A. equity method
B. direct write-off method
C. interest method
D. cost method


48. The direct write-off method of accounting for uncollectible accounts
A. emphasizes balance sheet relationships.
B. is often used by small companies and companies with few receivables.
C. emphasizes cash realizable value.
D. emphasizes the matching of expenses with revenues.

49. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
A. at the end of each accounting period.
B. when a credit sale is past due.
C. whenever a pre-determined amount of credit sales have been made.
D. when an account is determined to be worthless.

50. An alternative name for Bad Debt Expense is
A. Collection Expense.
B. Credit Loss Expense.
C. Uncollectible Accounts Expense.
D. Deadbeat Expense.

51. Two methods of accounting for uncollectible accounts are the
A. direct write-off method and the allowance method.
B. allowance method and the accrual method.
C. allowance method and the net realizable method.
D. direct write-off method and the accrual method.

52. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger
account is credited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Expense
B. Accounts Receivable
C. Allowance for Doubtful Accounts
D. Interest Expense

53. One of the weaknesses of the direct write-off method is that it
A. understates accounts receivable on the balance sheet
B. violates the matching principle
C. is too difficult to use for many companies
D. is based on estimates


54. The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts
receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be
uncollectible. The entry to write off this account would be which of the following?:
A. debit Allowance for Doubtful Accounts; credit Accounts Receivable

B. debit Sales Returns and Allowance, credit Accounts Receivable
C. debit Bad Debt Expense; credit Allowance for Doubtful Accounts
D. debit Bad Debt Expense; credit Accounts Receivable

55. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger
account is debited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Receivable
B. Accounts Receivable
C. Allowance for Doubtful Accounts
D. Bad Debts Expense

56. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is
debited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Expense
B. Allowance for Doubtful Accounts
C. Accounts Receivable
D. Interest Expense

57. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance
of $340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value
of the accounts receivable?
A. $51,000
B. $289,000
C. $340,000
D. $391,000

58. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is
credited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Expense
B. Accounts Receivable

C. Allowance for Doubtful Accounts
D. Interest Expense


59. On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the
A. Uncollectible accounts expense for the year
B. total of the accounts receivables written-off during the year
C. total estimated uncollectible accounts as of the end of the year
D. sum of all accounts that are past due.

60. What is the type of account and normal balance of Allowance for Doubtful Accounts?
A. Contra asset, credit
B. Asset, debit
C. Asset, credit
D. Contra asset, debit

61. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited
when
A. a customer's account becomes past due.
B. an account becomes bad and is written off.
C. a sale is made.
D. management estimates the amount of uncollectibles.

62. A debit balance in the Allowance for Doubtful Accounts
A. is the normal balance for that account.
B. indicates that actual bad debt write-offs have been less than what was estimated.
C. cannot occur if the percentage of receivables method of estimating bad debts is used.
D. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.

63. To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a

A. debit to Bad Debs Expense and a credit to Allowance for Doubtful Accounts.
B. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
C. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
D. debit to Loss on Credit Sales and a credit to Accounts Receivable.

64. Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts
A. Liabilities decrease.
B. Net Income is unchanged.
C. Total Assets are unchanged.
D. Total Assets decrease.


65. Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is
$390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the
outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the
Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?
A. Bad Debt Expense
17,000
Allowance for Doubtful Accounts
17,000
B. Bad Debt Expense
19,500
Allowance for Doubtful Accounts
19,500
C. Bad Debt Expense
22,000
Allowance for Doubtful Accounts
22,000
D. Bad Debt Expense
65,000

Allowance for Doubtful Accounts
65,000

66. 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
A. debit Bad Debt Expense and credit Allowance for Doubtful Accounts.
B. debit Bad Debt Expense and credit Accounts Receivable.
C. debit Allowance for Doubtful Accounts and credit Accounts Receivable.
D. debit Allowance for Doubtful Accounts and credit Bad Debt Expense

67. The balance in Allowance for Doubtful Accounts will directly impact the end of period adjustment for the
bad debt expense when using which of the following methods?
A. Allowance method
B. Direct write-off method
C. Accrual method
D. declining value method

68. An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals
$7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt
expense for the period will require a
A. debit to Bad Debt Expense for $8,600.
B. debit to Bad Debt Expense for $7,900.
C. debit to Bad Debt Expense for $7,200.
D. credit to Allowance for Doubtful Accounts for $700.


69. An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals
$6,400. If Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad debt
expense for the period will require a

A. debit to Bad Debt Expense for $7,700.
B. debit to Bad Debt Expense for $6,400.
C. debit to Bad Debt expense for $5,100
D. credit to Allowance for Doubtful Accounts for $1,300.

70. An aging of a company's accounts receivable indicates that estimate of the uncollectible accounts totals
$4,000. If Allowance for Doubtful Accounts has a $800 credit balance, the adjustment to record the bad debt
expense for the period will require a
A. debit to Allowance for Doubtful Accounts for $3,200.
B. debit to Bad Debt Expense for $3,200.
C. debit to Allowance for Doubtful Accounts for $4,000.
D. credit to Allowance for Doubtful Accounts for $4,000.

71. The collection of an account that had been previously written off under the allowance method of accounting
for uncollectibles
A. will increase net income in the period it is collected.
B. will decrease net income in the period it is collected.
C. does not affect net income in the period it is collected.
D. requires a correcting entry for the period in which the account was written off.

72. Allowance for Doubtful Accounts has a credit balance of $2,100 at the end of the year (before adjustment),
and an analysis of customers' accounts indicates uncollectible receivables of $19,700. Which of the following
entries records the proper adjustment for Bad Debt Expense?
A. debit Allowance for Doubtful Accounts, $17,600; credit Bad Debt Expense, $17,600
B. debit Allowance for Doubtful Accounts, $21,800; credit Bad Debt Expense, $21,800
C. debit Bad Debt Expense $21,800; credit Allowance for Doubtful Accounts, $21,800
D. debit Bad Debt Expense, $17,600; credit Allowance for Doubtful Accounts, $17,600

73. Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the year (before adjustment),
and an analysis of customers' accounts indicates uncollectible receivables of $12,900. Which of the following

entries records the proper adjustment for Bad Debt Expense?
A. debit Bad Debt Expense, $14,000; credit Allowance for Doubtful Accounts, $14,000
B. debit Allowance for Doubtful Accounts, $14,000; credit Bad Debt Expense, $14,000
C. debit Allowance for Doubtful Accounts, $11,800; credit Bad Debt Expense, $11,800
D. debit Bad Debt Expense, $11,800; credit Allowance for Doubtful Accounts, $11,800


74. Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year (before adjustment),
and an analysis of accounts in the customers ledger indicates uncollectible receivables of $13,000. Which of
the following entries records the proper adjusting entry for bad debt expense?
A. debit Bad Debt Expense, $600; credit Allowance for Doubtful Accounts, $600
B. debit Bad Debt Expense, $12,400; credit Allowance for Doubtful Accounts, $12,400
C. debit Allowance for Doubtful Accounts, $600; credit Bad Debt Expense, $600
D. debit Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600

75. At the beginning of the year, the balance in the Allowance for Doubtful Accounts is a credit of
$760. During the year, $120 of previously written-off accounts were reinstated and accounts totaling $740 are
written-off as uncollectible. The end of the year balance (before adjustment) in the Allowance for Doubtful
Accounts should be
A. $760
B. $120
C. $140
D. $740

76. Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific
receivable previously written off would include a
A. credit to Bad Debt Expense
B. credit to Accounts Receivable
C. debit to Allowance for Doubtful Accounts
D. debit to Accounts Receivable

77. Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has
determined that the Irish Company account is uncollectible. To write-off this account, Dalton should debit
A. Bad Debt Expense and credit Accounts Receivable
B. Bad Debt Expense and credit Allowance for Doubtful Accounts
C. Allowance for Doubtful Accounts and credit Accounts Receivable
D. Accounts receivable and credit Allowance for Doubtful Accounts

78. In accounting for uncollectible receivables, the balance in Allowance for Doubtful Accounts will directly
impact the amount of the adjustment when applying which method?
A. direct write-off method
B. percentage of sales method
C. Analysis of receivables method
D. both (b) and (c)


79. Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates
that 3% of net credit sales will be uncollectible. On January 1, 2010, the Allowance for Doubtful Accounts had
a credit balance of $2,400. During 2010, Abbott wrote-off accounts receivable totaling $1,800 and made credit
sales of $100,000. There were no Sales Returns or Sales Discounts during the year. After the adjusting entry,
the December 31, 2010, balance in the Bad Debt Expense would be
A. $1,200
B. $3,000
C. $3,600
D. $7,200

80. A company uses the allowance method to account for uncollectible accounts receivables.
writes off a specific customer's account receivable
A. total current assets are reduced
B. total expenses for the period are increased

C. net realizable value of accounts receivable increases
D. there is no effect on total current assets or total expenses

When the firm

81. Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year (before
adjustment). The company prepares an analysis of customers' accounts to estimate the amount of uncollectible
accounts of $41,900. Which of the following adjusting entries would be made to record the Bad Debt Expense
for the year?
A. debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600
B. debit Allowance for Doubtful Accounts $43,200; credit Bad Debt Expense, $43,200
C. debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200
D. debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600

82. Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment).
The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to
be $31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?
A. debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
B. debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200
C. debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
D. debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600

83. Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year (before adjustment),
and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $800,000, the amount of the
adjusting entry to record the estimate of the uncollectible accounts is
A. $29,500
B. $34,500
C. $32,000
D. cannot be determined

84. Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment),
and an analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts
should be $16,000. Based on the estimate above, which of the following adjusting entries should be made?
A. debit Bad Debt Expense, $800; credit Allowance for Doubtful Accounts, $800
B. debit Bad Debt Expense, $15,200; credit Allowance for Doubtful Accounts, $15,200
C. debit Allowance for Doubtful Accounts, $800; credit Bad Debt Expense, $800
D. debit Bad Debt Expense, $16,800; credit Allowance for Doubtful Accounts, $16,800

85. When using the allowance method to estimate uncollectible accounts receivable based on an analysis of
receivables shows that $640 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts
has a debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for
Doubtful Accounts in the amount of:
A. $110
B. $640
C. $530
D. $750

86. Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment),
and bad debt expense is estimated at 3% of net credit sales. If net credit sales are $300,000, the amount of the
adjusting entry to record the estimated uncollectible accounts receivables is
A. $8,500
B. $8,500
C. $9,000
D. Cannot be determined

87. Allowance for Doubtful Accounts is classified as a(n) ______ and has a normal ______ balance.
A. owners’ equity, credit
B. contra-asset, debit
C. owners’ equity, debit

D. contra-asset, credit

88. Under the allowance method of accounting for uncollectible receivables, writing off an uncollectible
account.
A. affects only income statement accounts.
B. is not an acceptable practice.
C. affects only balance sheet accounts.
D. affects both balance sheet and income statement accounts.


89. When comparing the direct write-off method and the allowance method of accounting for uncollectible
receivables, a major difference is that the direct write-off method
A. uses a percentage of sales method to estimate uncollectible accounts.
B. is used primarily by large companies with many receivables.
C. is used primarily by small companies with few receivables.
D. uses an allowance account.

90. When a company uses the allowance method of accounting for uncollectible receivables, which entry would
not be found in the general journal?
A. Bad Debt Expense
500
Allowance for Doubtful Accounts
500
B. Bad Debt Expense
500
Accounts Receivable - Bob Smith
500
C. Cash
300
Allowance for Doubtful Accounts 200

Accounts Receivable - Bob Smith
500
D. Cash
500
Accounts Receivable - Bob Smith
500

91. When a company uses the allowance method of accounting for uncollectible receivables, the entry to
reinstate a previously written off account would include:
A. A credit to Bad Debt Expense
B. A debit to Bad Debt Expense
C. A debit to Allowance for Doubtful Accounts
D. A credit to Allowance for Doubtful Accounts

92. The amount of a promissory note is called the
A. realizable value
B. maturity value
C. face value
D. proceeds

93. The amount of the promissory note plus the interest earned on the due date is called the
A. interest value
B. maturity value
C. face value
D. issuance value


94. A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of
the note is
A. $6,860

B. $7,140
C. $7,840
D. $7,000

95. A 60-day, 9% note for $10,000, dated May 1, is received from a customer on account. The maturity value
of the note is
A. $10,000
B. $10,150
C. $10,900
D. $9,100

96. Interest on a note can be calculated without knowledge of the
A. fair value of the note
B. rate of interest
C. notes duration
D. principal amount

97. On October 1, Black Company receives a 9% interest bearing note from Reese Company to settle a $20,000
account receivable. The note is due in six months. At December 31, Black should record interest revenue of
A. $0
B. $450
C. $900
D. $1,800

98. If the maker of a promissory note fails to pay the note on the due date, the note is said to be
A. displaced
B. disallowed
C. dishonored
D. discounted

99. The journal entry to record a note received from a customer to replace an account is
A. debit Notes Receivable; credit Accounts Receivable
B. debit Accounts Receivable; credit Notes Receivable
C. debit Cash; credit Notes Receivable
D. debit Notes Receivable; credit Notes Payable


100. A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal
entry to recognize this event is
A. debit Cash, $6,120; credit Notes Receivable, $6,120
B. debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; Credit Interest Receivable, $120
C. debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
D. debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; Credit Interest Revenue, $120

101. When referring to a note receivable or promissory note
A. the maker is the party to whom the money is due.
B. the note is not considered a formal credit instrument.
C. the note cannot be factored to another party.
D. the note may be used to settle an accounts receivable.

102. When a company receives an interest-bearing note receivable, it will
A. debit Notes Receivable for the maturity value of the note.
B. debit Notes Receivable for the face value of the note.
C. credit Notes Receivable for the maturity value of the note.
D. credit Notes Receivable for the face value of the note.

103. Paper Company receives a $6,000, 3-month, 6% promissory note from Dame Company in settlement of an
open accounts receivable. What entry will Paper Company make upon receiving the note?
A. Notes Receivable
6,000

Accounts Receivable—Dame Company
6,000
B. Notes Receivable
6,090
Accounts Receivable—Dame Company
6,090
C. Notes Receivable
6,090
Accounts Receivable—Dame Company
6,000
Interest Revenue
90
D. Notes Receivable
6,000
Interest Revenue
90
Accounts Receivable—Dame Company
6,000
Interest Receivable
90

104. The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is
A. $40,000
B. $40,400
C. $43,600
D. $44,000


105. 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?
A. Cash
200
Interest Revenue
200
B.
Interest Receivable
800
Interest Revenue
800
C. Interest Receivable
200
Interest Revenue
200
D. Note Receivable
40,000
Cash
40,000

106. On August 1, Kim Company accepted a 90-day note receivable as payment for services provided to Hsu
Company. The terms of the note were $20,000 face value and 6% interest. On October 30, the journal entry to
record the collection of the note should include a
A. credit to Notes Receivable for $20,300
B. debit to Interest Receivable for $300
C. credit to Interest Revenue for $300
D. debit to Notes Receivable for $20,000

107. Current assets are usually listed in order
A. of the due date
B. of the size

C. alphabetically
D. of liquidity

108. Accounts Receivable Turnover measures
A. how frequently during the year the accounts receivable are converted to cash
B. the number of days of accounts receivable outstanding
C. the fair market value of accounts receivable
D. the efficiency of the accounts payable function

109. The number of days' sales in receivables
A. is an estimate of the length of time the receivables have been outstanding
B. measures the number of times the receivables turn over each year
C. is Net Credit Sales divided by Average Receivables
D. is not meaningful and therefore is not used


110. Given the following information, compute Accounts Receivable Turnover:

Gross Sales:
Net Sales:

$150,000
$135,000

Accounts Receivable, Beginning of Year: $18,000
Accounts Receivable, End of Year:
$22,000

A. 6.75
B. 7.5

C. 6.13
D. 6.82
111. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables
estimates uncollectible receivables as $25,000.
Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance of
Doubtful Accounts, respectively.
A. $19,500 and $25,000
B. $30,500 and $525,000
C. $19,500 and $525,000
D. $30,500 and $25,000

112. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables
estimates uncollectible receivables as $25,000.
Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the
adjusting entry for bad debt expense and the adjusted balance Allowance of Doubtful Accounts.)
A. $550,000
B. $544,500
C. $525,000
D. $575,000


113. Match each of the following terms associated with the best description of that term.
1. The difference between Accounts Receivable
and Allowance for Doubtful Accounts.
2. A list of customer accounts sorted by age
classes.
3. Operating expense recorded as a result of
receivables becoming uncollectible.

4. A contra asset that represents the amount of
estimated uncollectible receivables at a specific
date.
5. A receivable created from selling merchandise
or services on account.
6. All money claims against other entities.
7. Another term for selling receivables.
8. Records bad debt expense only when a specific
customer’s account is deemed worthless.
9. Measures how frequently during the year
accounts receivables are being turned into cash.

Accounts Receivable ____
Aging Report ____
Allowance for
Doubtful Accounts ____
Direct Write-off
Method ____
Bad Debt Expense ____
Net Realizable Value ____
Factoring ____
Receivables ____
Accounts Receivable
Turnover ____

114. Match each of the following terms associated with notes receivable with the best description of that term.

1. The amount due when the note is paid off.
2. The amount charged for using the money of another
party.

3. The time between the date a note is issued and the
due date of the note.
4. The stated rate charged for using the money of
another party
5. A formal written instrument that represents amounts
due from customers.
6. The party promising to pay a note
7. The dollar amount listed on the promissory note.
8. A note that is not paid when it is due

Notes
Receivable ____
Maturity Value ____
Interest ____
Interest Rate
Dishonored
Note
Face Amount
Maker
Term

____
____
____
____
____

115. Other than accounts receivable and notes receivable, name other receivables that might be included in the
general ledger.

116. Discuss the similarities and differences between accounts receivables, notes receivables and other
receivables.

117. List at least three things that indicate a receivable may be uncollectible.

118. Discuss the two methods for recording bad-debt expense. What type of company uses each method?


119. Journalize the following transactions using the direct write-off method of accounting for uncollectible
receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs for and received cash in full payment.

120. Stephanie Roe utilizes the direct write-off method of accounting for uncollectible receivables. On
September 15th she is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is
expected in the liquidation of Jacob Marley. Write off the $675 of accounts receivable due Jacob Marley.

121. Journalize the following transactions using the direct write-off method of accounting for uncollectible
receivables:
Feb 20 Received $1,000 from Andrew Warren and wrote off the remainder owed of $4,000 as uncollectible.
May 10 Reinstated the account of Andrew Warren and received $4,000 cash in full payment.


122. The following journal entries would be used in one of the two methods of accounting for uncollectible
receivables. Identify each.
(a)
Bad Debt Expense
Accounts Receivable-Billings

(b)
Allowance for Doubtful Accounts
Accounts Receivable-Grover

900
900

900
900

123. Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases and
indicate the ending balance in each case.

(a)
(b)

Credit balance of $300 in Allowance for Doubtful Accounts just prior to adjustment. Analysis of Accounts Receivable indicates
uncollectible receivables of $8,500.
Credit balance of $500 in Allowance for Doubtful Accounts just prior to adjustment. Uncollectible receivables are estimated at 2% of
credit sales, which totaled $1,000,000 for the year.


124. Journalize the following transactions using the allowance method of accounting for uncollectible
receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.

125. At the end of the current year, Accounts Receivable has a balance of $700,000; Allowance for Doubtful

Accounts has a credit balance of $5,500; and net sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of 1% of net sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.

126. At the end of the current year, Accounts Receivable has a balance of $750,000; Allowance for Doubtful
Accounts has a debit balance of $6,200; and net sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of 1% of net sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.


127. At the end of the current year, Accounts Receivable has a balance of $90,000; Allowance for Doubtful
Accounts has a credit balance of $850; and net sales for the year total $300,000. Bad debt expense is estimated
at 2.5% of net sales.
Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of
Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value
of accounts receivable.

128. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables
estimates uncollectible receivables as $25,000.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.

129. At the end of the current year, Accounts Receivable has a balance of $675,000; Allowance for Doubtful
Accounts has a debit balance of $5,400; and net sales for the year total $3,000,000. An analysis of receivables

indicates the uncollectible receivables are estimated to be $45,000.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.