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Gideon Company uses the allowance method of accounting for uncollectible accounts.
On May 3, the Gideon Company wrote off the $2,100 uncollectible account of its customer, A. Hopkins.
The entry or entries Gideon makes to record the write off of the account on May 3 is:
 
Accounts Receivable—A. Hopkins              2,100     
Allowance for Doubtful Accounts                               2,100
 
Allowance for Doubtful Accounts               2,100     
Bad debts expense                           2,100
 
Accounts Receivable—A. Hopkins              2,100     
Bad debts expense                           2,100
Cash      2,100     
Accounts Receivable—A. Hopkins                              2,100
Cash      2,100     
Accounts Receivable—A. Hopkins                              2,100
 
Allowance for Doubtful Accounts             2,100     
Accounts Receivable—A. Hopkins                            2,100
   
A company had net sales of $630,000, total sales of $780,000, and an average accounts receivable of $76,500.
Its accounts receivable turnover equals:
 
0.10
8.24
10.20
0.81
0.12
   
On July 9, Mifflin Company receives a $7,800, 150-day, 10% note from customer Payton Summers as payment on account.
Compute the amount due at maturity for the note. (Use 360 days a year.)
 
$7,447
$7,947
$8,125
$7,800
   
On December 31 of the current year, the unadjusted trial balance of a company using the percent of
receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $97,800;
Allowance for Doubtful Accounts, credit balance of $1,021. What amount should be debited to Bad Debts Expense,
assuming 3% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?
 
$2,934.
$3,955.
$1,913
$1,020.
$1,021
   
Craigmont uses the allowance method to account for uncollectible accounts.
Its year-end unadjusted trial balance shows Accounts Receivable of $110,500, allowance for doubtful
accounts of $725 (credit) and sales of $955,000. If uncollectible accounts are estimated to be 0.8% of sales,
what is the amount of the bad debts expense adjusting entry?
 
$8,365
$7,640
$7,765
$6,915
$7,840
   
Brinker accepts all major bank credit cards, including First Savings Bank's, which assesses a 4% charge
on sales for using its card. On May 26,
Brinker had $5,900 in First Savings Bank Card credit sales. What entry should Brinker make on May 26
to record the deposit?
 
Debit Cash $6,136; credit Credit Card Expense $236; credit Sales $5,900.
Debit Accounts Receivable $5,664; debit Credit Card Expense $236; credit Sales $5,900
Debit Cash $5,900; credit Sales $5,900.
Debit Accounts Receivable $5,900; credit Sales $5,900.
Debit Cash $5,664; debit Credit Card Expense $236; credit Sales $5,900
   
A company ages its accounts receivables to determine its end of period adjustment for bad debts.
At the end of the current year, management estimated that
$17,250 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments,
the Allowance for Doubtful Accounts had a debit
balance of $425. What adjusting entry should the company make at the end of the current year to record
its estimated bad debts expense?
 
Bad Debts Expense          16,825  
Allowance for Doubtful Accounts                               16,825
 
Accounts Receivable       17,675  
Allowance for Doubtful Accounts                               17,675
 
Bad Debts Expense          17,250  
Allowance for Doubtful Accounts                               17,250
 
Accounts Receivable       17,250  
Bad Debts Expense          425         
Sales                      17,675
 
Bad Debts Expense         17,675  
Allowance for Doubtful Accounts                             17,675
   
The following selected amounts are reported on the year-end unadjusted trial balance report for
a company that uses the percent of sales method
to determine its bad debts expense.
                                 
Accounts receivable                                       $             436,000               Debit
Allowance for Doubtful Accounts                             1,260                    Debit
Net Sales                                                                             2,110,000           Credit
 
All sales are made on credit. Based on past experience, the company estimates 2.0% of credit sales
to be uncollectible. What adjusting entry should
the company make at the end of the current year to record its estimated bad debts expense?
 
Debit Bad Debts Expense $9,980; credit Allowance for Doubtful Accounts $9,980.
Debit Bad Debts Expense $42,200; credit Allowance for Doubtful Accounts $42,200
Debit Bad Debts Expense $43,460; credit Allowance for Doubtful Accounts $43,460.
Debit Bad Debts Expense $40,940; credit Allowance for Doubtful Accounts $40,940.
Debit Bad Debts Expense $8,720; credit Allowance for Doubtful Accounts $8,720
   
A company borrowed $21,000 by signing a 90-day promissory note at 12%.
The maturity value of the note is: (Use 360 days a year.)
 
$29,715.00
$29,452.50
$31,920.00
$21,630.00
$30,345.00
   
The interest accrued on $6,000 at 7% for 90 days is: (Use 360 days a year.)
 
$42.
$105
$49.
$490.
$210
   
Duerr company makes a $64,000, 60-day, 15% cash loan to Ryan Co.
The maturity value of the loan is: (Use 360 days a year.)
 
$73,600.
$62,400.
$1,600
$65,600.
$64,000.
   
A company uses the percent of sales method to determine its bad debts expense.
At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:                    
Accounts receivable                                       $                             380,000               debit
Allowance for uncollectible accounts                     550                        credit
Net Sales                                                                                             850,000               credit
 
All sales are made on credit. Based on past experience, the company estimates that 0.6% of net
credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?
 
$1,410
$5,100
$5,660
$1,960
$4,560
   
Jasper makes a $27,000, 90-day, 8.0% cash loan to Clayborn Co. Jasper's entry to record the collection
of the note and interest at maturity should be: (Use 360 days a year.)
 
Debit Cash $27,540.00; credit Interest Revenue $540.00; credit Notes Receivable $27,000
Debit Notes Payable $27,000; Debit Interest Expense $2,160; credit Cash $29,160.
Debit Cash for $27,000; credit Notes Receivable $27,000.
Debit Cash $29,160; credit Interest Revenue $2,160, credit Notes Receivable $27,000.
Debit Cash $27,540.00; credit Notes Receivable for $27,540.00.
   
All sales are made on credit. Based on past experience, the company estimates that 0.3% of net credit
sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?
 
$3,007
$1,787
$2,397
$1,672
$452
   
A company has $93,000 in outstanding accounts receivable and it uses the allowance method to
account for uncollectible accounts. Experience suggests that 3% of outstanding receivables are uncollectible.
The current balance (before adjustments) in the allowance for doubtful accounts is a(n) $830 debit.
The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:
 
None of these is correct.
$830
$2,790
$3,620
$1,960
   
A company has net sales of $2,419,200 and average accounts receivable of $448,000.
What is its accounts receivable turnover for the period?
 
9.80
0.44
82.60
5.40
27.20
   
Winkler Company borrows $100,000 and pledges its receivables as security.
The journal entry to record this transaction would be:
 
Debit Cash of $100,000 and credit Accounts Receivable $100,000.
Debit Cash $100,000 and credit Notes Payable $100,000
Debit Cash of $100,000 and credit Accounts Payable $100,000.
Debit Note Receivable $100,000 and credit Accounts Receivable $100,000.
Debit Accounts Receivable $100,000 and credit Notes Payable $100,000.
   
A company factored $50,000 of its accounts receivable and was charged a 1% factoring fee.
The journal entry to record this transaction would include a:
 
Debit to Cash of $50,000 and a credit to Accounts Receivable of $50,000.
Debit to Cash of $50,000 and a credit to Notes Payable of $50,000.
Debit to Cash of $50,500 and a credit to Accounts Receivable of $50,500.
Debit to Cash of $49,500, a debit to Factoring Fee Expense of $500, and a credit to Accounts Receivable of $50,000
Debit to Cash of $50,000, a credit to Factoring Fee Expense of $500, and a credit to Accounts Receivable of $49,500.
   
A company borrowed $28,000 by signing a 180-day promissory note at 6%.
The total interest due on the maturity date is: (Use 360 days a year.)
 
$840.00
$1,680.00
$420.00
$1,260.00
$140.00
   
Valley Spa purchased $11,300 in plumbing components from Tubman Co. Valley Spa Studios signed a 120-day,
6% promissory note for $11,300. If the note is dishonored, what is the amount due on the note? (Use 360 days a year.)
 
$11,550
$11,630
$11,300
$226
$11,526
   
A company uses the percent of sales method to determine its bad debts expense.
At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:

Accounts receivable                                       $             349,000                debit
Allowance for uncollectible accounts     660                        credit
Net sales                                                                             794,000                credit

All sales are made on credit. Based on past experience, the company estimates 0.6% of credit sales to
be uncollectible. What adjusting entry should the company make at the end of the current year to record
its estimated bad debts expense?
 
Debit Bad Debts Expense                                                             $4,764
Credit Allowance for Doubtful Accounts                                               $4,764.

$794,000 × 0.006 = $4,764
   
In the table below the information for four companies is provided.
 
Company             Accounts Receivable turnover                     Average collection period
Martin                                  13.9                                                                       26.3
Lewis                                     13.3                                                                       27.4
Danforth                              10.4                                                                       35.1
Garner                                  14.5                                                                       25.2
Industry Average              13.0                                                                       28.1
 
Assuming all four companies are in the same industry, which company appears to have the greatest likelihood of paying its current obligations?
 
a. Martin
b. Lewis
c. Danforth
d. Garner
   
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 Allowance for Doubtful Accounts and credit Bad Debt Expense.
b. debit Allowance for Doubtful Accounts and credit Accounts Receivable.
c. debit Bad Debt Expense and credit Allowance for Doubtful Accounts.
d. debit Bad Debt Expense and credit Accounts Receivable.
   
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 exceeded 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.
   
Carson Company on July 15 sells merchandise on account to Tayler Co. for $2,000,
terms 2/10, n/30. On July 20 Tayler Co. returns merchandise worth $800 to Carson Company.
On July 24 payment is received from Tayler Co. for the balance due. What is the amount of cash received?
 
a. $1,200
b. $1,176
c. $1,160
d. $2,000
   
Under the allowance method, Bad Debt Expense is recorded
 
a. when an individual account is written off.
b. when the loss amount is known.
c. for an amount that the company estimates it will not collect.
d. several times during the accounting period.
   
Using the percentage-of-receivables method for recording bad debt expense, estimated
uncollectible accounts are $55,000. If the balance of the Allowance for Doubtful Accounts is
$11,000 debit before adjustment what is the balance after adjustment?
 
a. $55,000
b. $11,000
c. $56,000
d. $34,000
   
The account Allowance for Doubtful Accounts is classified as a(n)
 
a. liability.
b. contra account of Bad Debt Expense.
c. expense.
d. contra account to Accounts Receivable.
   
If a company fails to record estimated bad debts expense,
 
a. cash realizable value is understated.
b. expenses are understated.
c. revenues are understated.
d. receivables are understated.
   
M. Cornett is a corporation that sells breakfast cereal. Based on the accounts listed below, what are M. Cornett's total trade receivables?
 
Income tax refund due                                                                                   $             500
Advance due to the company from the company president                             300
3-month note due from M. Cornett's main customer                                         2,000
Interest due this month on the above note                                                             100
Due and unpaid from this month's sales                                                                  9,000
Due and unpaid from last month's sales                                                                  1,000
 
a. $9,000
b. $12,000
c. $11,000
d. $12,900
B.) $12,000
   
The interest on a $15,000, 6%, 90-day note receivable is
 
a. $900.
b. $450.
c. $225.
d. $675.
   
The percentage of receivables basis for estimating uncollectible accounts emphasizes
 
a. cash realizable value.
b. the relationship between accounts receivable and bad debts expense.
c. income statement relationships.
d. the relationship between sales and accounts receivable.
   
Which one of the following is not an accounting problem (issue) associated with accounts receivable?
 
a. Depreciating accounts receivable
b. Recognizing accounts receivable
c. Valuing accounts receivable
d. Accelerating cash receipts from accounts receivable
   
An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible.
If Allowance for Doubtful Accounts has a $2,400 credit balance, the adjustment to record bad debts
for the period will require a
 
a. debit to Bad Debt Expense for $9,000.
b. debit to Allowance for Doubtful Accounts for $6,600.
c. debit to Bad Debt Expense for $6,600.
d. credit to Allowance for Doubtful Accounts for $9,000.
   
In 2017 the Golic Co. had net credit sales of $900,000. On January 1, 2017, the Allowance for
Doubtful Accounts had a credit balance of $15,000. During 2017, $24,000 of uncollectible accounts
receivable were written off. Past experience indicates that the allowance should be 10% of the
balance in receivables (percentage-of-receivables basis). If the accounts receivable balance at December 31
was $160,000 what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2014?
 
a. $24,000.
b. $37,500.
c. $46,500
d. $36,000.
   
One might infer from a debit balance in Allowance for Doubtful Accounts that
 
a. a posting error has been made.
b. more accounts have been written off than had been estimated.
c. the direct method is being used.
d. Bad Debt Expense has been overestimated.
   
The interest rate for a three-month loan would normally be stated in terms of which of the following rates of interest?
 
a. Daily
b. Monthly
c. Quarterly
d. Annual
   
The net amount expected to be received in cash from receivables is termed the
 
a. cash realizable value.
b. cash-good value.
c. gross cash value.
d. cash-equivalent value.
   
A promissory note
 
a. is not a formal credit instrument.
b. may be used to settle an accounts receivable.
c. has the party to whom the money is due as the maker.
d. cannot be factored to another party.
   
Interest is usually associated with
 
a. accounts receivable.
b. notes receivable.
c. doubtful accounts.
d. bad debts.
   
Which of the following is a way of disposing of a note receivable?
 
a. Honoring it on maturity date.
b. Selling it to receive cash before the maturity date.
c. Default by the maker.
d. All of these are ways to dispose of notes receivable
   
A high accounts receivable turnover ratio indicates
 
a. the company's sales are increasing.
b. a large proportion of the company's sales are on credit.
c. customers are making payments very quickly.
d. customers are making payments slowly.
   
The sale of receivables by a business
 
a. indicates that the business is in financial difficulty.
b. is generally the major revenue item on its income statement.
c. is an indication that the business is owned by a captive finance company.
d. can be a quick way to generate cash for operating needs.
   
When an account becomes uncollectible and must be written off
 
a. Allowance for Doubtful Accounts should be credited.
b. Accounts Receivable should be credited.
c. Bad Debt Expense should be credited.
d. Sales Revenue should be debited.
   
Kinsler Company uses the percentage-of-receivables method for recording bad debt expense.
The Accounts Receivable balance is $200,000 and credit sales are $1,000,000. Management estimates
that 6% of accounts receivable will be uncollectible. What adjusting entry will Kinsler Company make if
the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?
 
a. Bad Debt Expense 14,000, Allowance for Doubtful Accounts 14,000
b. Bad Debt Expense 12,000, Allowance for Doubtful Accounts 12,000
c. Bad Debt Expense 10,000, Allowance for Doubtful Accounts 10,000
d. Bad Debt Expense 8,000, Accounts Receivable 8,000
   
Under the allowance method of accounting for bad debts, why must uncollectible accounts
receivable be estimated at the end of the accounting period?
 
a. To allow the collection department to schedule work for the next accounting period.
b. To determine the gross realizable value of accounts receivable.
c. The IRS rules require the company to make the estimate.
d. To match bad debt expense to the period in which the revenues were earned.
   
The expense recognition principle relates to credit losses by stating that bad debt expense should be recorded
a. in the same period as allowed for tax purposes.
b. in the period of the sale.
c. for an exact amount.
d. in the period of the loss.
   
Young Company lends Dobson industries $40,000 on August 1, 2014, accepting a 9-month,
12% interest note. If Young prepares it financial statements as of December 31, 2014,
what adjusting entry must it make?
 
a. Interest Receivable 2,000, Interest Revenue 2,000
b. Accounts Receivable 2,000, Interest Receivable 2,000
c. Cash 2,000, Interest Revenue 2,000
d. Notes Receivable 2,000, Interest Revenue 2,000
   
On January 15, Nifty Company sells merchandise on account to Martinez Associates for $3,000 with
terms 3/10, n/30. On January 20, Martinez returns merchandise worth $600 to Nifty. On January 24,
payment is received from Martinez for the balance due. What is the amount of cash received?
 
a. $4,000
b. $3,380
c. $3,350
d. $2,800
 
Bad Debt Expense is considered
 
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.
   
The interest on a $20,000, 6%, 60-day note receivable is
 
a. $1,200.
b. $200.
c. $400.
d. $600.
   
The financial statements of the Nelson Manufacturing Company reports net sales of $360,000 and accounts
receivable of $50,000 and $30,000 at the beginning of the year and end of year, respectively.
What is the accounts receivable turnover for Nelson?
 
a. 4.5 times
b. 7.2 times
c. 12.0 times
d. 9.0 times
   
Simonic Retailers accepted $90,000 of Citibank Visa credit card charges for merchandise sold on July 1.
Citibank charges 4% for its credit card use. The entry to record this transaction by Simonic Retailers will
include a credit to Sales Revenue of $90,000 and a debit(s) to
 
a. Cash $86,400 and Service Charge Expense $3,600.
b. Accounts Receivable $86,400 and Service Charge Expense $3,600.
c. Cash $86,400 and Interest Expense $3,600.
d. Accounts Receivable $90,000.
   
During 2017 Sedgewick Inc. had sales on account of $264,000, cash sales of $108,000, and collections on
account of $168,000. In addition, they collected $2,900 which had been written off as uncollectible in 2016.
As a result of these transactions the change in the accounts receivable balance indicates a
 
a. $402,200 increase.
b. $ 192,000 increase.
c. $ 186,000 increase.
d. $408,000 increase.
   
Factoring arrangements
 
a. are ways to accelerate receivable collections.
b. involve no commissions or service charges because the factor is guaranteed collections on the due date.
c. are generally used by businesses that are insolvent.
d. are mainly used in the textile and furniture industries.
   
The term "receivables" refers to
 
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.
   
The accounts receivable turnover is used to analyze
 
a. profitability.
b. liquidity.
c. risk.
d. long-term solvency.
   
Rosen Company receives a $5,000, 3-month, 6% promissory note from Bay Company in settlement of an
open accounts receivable. What entry will Rosen Company make upon receiving the note?
 
a. Notes Receivable 5,075 / Accounts Receivable—Bay Company 5,075
b. Notes Receivable 5,075 / Accounts Receivable—Bay Company 5,000 / Interest Revenue 75
c. Notes Receivable 5,000 / Interest Receivable 75
Accounts Receivable—Bay Company 5,000 / Interest Revenue 75
d. Notes Receivable 5,000 / Accounts Receivable—Bay Company 5,000
   
Which one of the following statements is false?
 
a. This entry is only prepared on the last day of the accounting period.
b. There should be written authorization related to recording cash.
c. There could be a violation of internal control policies.
d. James' account was written off because it was determined to be uncollectible.
   
Receivables are
 
a. one of the most liquid assets and thus are always considered current assets.
b. claims that are expected to be collected in cash.
c. shown on the income statement at cash realizable value.
d. always the result of revenue recognition.
   
Ramos Company has a 90-day note that carries an annual interest rate of 8%. If the amount of the
total interest on the note is equal to $700, then what is the principal of the note?
 
a. $11,250
b. $45,000
c. $64,800
d. $28,800
   
A 90-day note dated June 30, 2017, would mature on:
 
a. September 30, 2017.
b. September 27, 2017.
c. September 28, 2017.
d. September 29, 2017
   
A company purchased a cash register on January 1 for $5,700. This register has a useful life of 10 years and
a salvage value of $550. What would be the depreciation expense for the second year of its useful life using
the double-declining-balance method?
 
$912.

5,700 × (2 × .10) = 1,140
5,700 − 1,140) × (2 × .10) = 912
   
A company uses the percent of sales method to determine its bad debts expense.
At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:


Accounts receivable $ 347,000 debit
Allowance for uncollectible accounts 680 credit
Net sales 792,000 credit

All sales are made on credit. Based on past experience, the company estimates 0.4% of credit sales to be uncollectible.
What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?
 
$3,168

$792,000 × 0.004 = $3,168
   
Lomax Enterprises purchased a depreciable asset for $31,000 on March 1, Year 1.
The asset will be depreciated using the straight-line method over its four-year useful life.
Assuming the asset's salvage value is $3,800, Lomax Enterprises should recognize depreciation
expense in Year 2 in the amount of:
 
$6,800.00
 
31,000 − 3,800 / 4 = 6,800
   
On March 17, Grady Company agrees to accept a 60-day, 10%, $5,400 note from Alert Company to
extend the due date on an overdue account. What is the journal entry needed to record the transaction by Alert Company?
 
Debit Accounts Payable                $5,400
Credit Notes Payable                     $5,400.
   
A company issued 190 shares of $100 par value stock for $22,600 cash.
The total amount of paid-in capital in excess of par is:
 
$3,600.
   
On January 1, a company issues bonds dated January 1 with a par value of $260,000.
The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31.
The market rate is 6% and the bonds are sold for $271,091. The journal entry to record the first interest payment
using the effective interest method of amortization is:
 
Debit Interest Expense                                  $8,132.73
Debit Premium on Bonds Payable            $967.27
Credit Cash                                                         $9,100.00.

9,100.00 - 8,132.73 = 967.27
271,091.00 × .06 × .50 = 8,132.73
   
Six months ago, a company purchased an investment in stock for $72,000.
The investment is classified as available-for-sale securities. The current fair value of the stock is $76,050.
The company should record a:
 
Credit to Unrealized Gain-Equity for $4,050.
   
Clark Corporation purchased 40% of IT Corporation for $180,000 on January 1. On May 20 of the same year,
IT Corporation declared total cash dividends of $45,000. At year-end, IT Corporation reported net income of
$225,000. The balance in Clark Corporation's Long-Term Investment-IT Corporation account as of December 31 should be:
 
$252,000.
 
180,000 - (.40 × 45,000) + (.40 × 225,000) = 252,000
   
Stojko Corporation had a net decrease in cash of $11,500 for the current year. Net cash used in investing
activities was $53,500 and net cash used in financing activities was $39,500. What amount of cash was
provided (used) in operating activities?
 
$81,500 provided
 
−$11,500 + 53,500 + 39,500 = 81,500
   
Alpha Company loaned $5,000 to Beta Company on October 1, Year 1 at 6% interest.
On December 31, Year 1 Alpha Company's financial statements will report accrued interest of ______.
 
$75
   
Use the following information and the indirect method to calculate the net cash provided or used by operating activities:

Net income                                         $              13,600
Depreciation expense                                    13,300
Payment on mortgage payable                   16,300
Gain on sale of land                                         7,000
Increase in merchandise inventory           3,350
Increase in accounts payable                       7,450
Proceeds from sale of land                           8,650
 
$24,000.
 
13,600 + 13,300 - 7,000 - 3,350 + 7,450 = 24,000
   
If a company has a significant concentration of credit risk, it is not required to discuss that in its notes to its financial
statements as that could increase the related risk.
 
False
   
Accounts receivable are the results of cash and credit sales
 
False
   
The allowance method of handling bad debts violates the matching principle.
 
False
   
The direct write-off method of recognizing uncollectible accounts is not in accordance with good accounting practice.
 
True
   
A major advantage of national credit cards to retailers is that there is no charge to the retailer by the credit card companies for their services.
 
False
   
A factor buys receivables from businesses for a fee and collects the payment directly from customers.
 
True
   
The holder of a note adjusts for accrued interest by debiting Interest Receivable and crediting Interest Revenue.
 
True
   
The average collection period is frequently used to assess the effectiveness of a company's credit and collection policies.
 
True
   
Allowance for Doubtful Accounts is a contra account that is deducted from Accounts Receivable on the balance sheet.
 
True
   
A dishonored Note is a note that is not paid in full at maturity.
 
True
   
When using the allowance method bad debt expense is recorded when an individual customer defaults.
 
False
   
Under the direct write-off method, no attempt is made to match bad debt expense to sales revenues in the same accounting period.
 
True
   
Uncollectible accounts must be estimated because it is not possible to know which accounts will not be collected.
 
True
   
When an account receivable that was previously written off is collected, it is first necessary to reverse the entry to reinstate
the customer's account before recording the collection.
 
True
   
When using the direct write-off method year-end adjustments for bad debt expense must be made.
 
False
   
An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid,
the greater the probability that it will eventually be collected.
 
False
   
Accounts receivable are one of a company's least liquid assets.
 
False
   
Cash realizable value is determined by subtracting Allowance for Doubtful Accounts from Net Sales.
 
False
   
A note receivable is a written promise by the maker to the payee to pay a specified amount of money at a definite time.
 
True

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2