FINAL REVIEW (Ch. 8) – Flashcards

Notes and accounts receivable that result from sales transactions are sometimes called: A) intangible assets. B) current liabilities. C) trade receivables. D) fixed assets.

A note receivable due in 12 months is listed on the balance sheet under the caption: A) investments. B) fixed assets. C) current assets. D) long-term liabilities.

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

Companies may sell their receivables. This practice is called: A) expensing. B) factoring. C) dumping. D) hedging.

The two methods of accounting for un-collectible receivables are the direct method and the __________ method: A) cost B) equity C) interest D) allowance

The direct write-off method is required: A) for companies that factor their receivables. B) where receivables are a large part of the current assets. C) for federal income tax purposes. D) by GAAP.

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 2% of sales. If sales are $500,000, the adjusting entry for uncollectible accounts would include: A) None of these answer choices are correct. B) a credit to Allowance for Doubtful Accounts of $10,500. C) a credit to Allowance for Doubtful Accounts of $10,000. D) a credit to Allowance for Doubtful Accounts of $9,500.

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and an analysis of accounts in the customer ledger indicates doubtful accounts of $16,000. Which of the following entries records the proper provision for doubtful accounts: A) debit Bad Debt Expense, $15,500; credit Allowance for Doubtful Accounts, $15,500. B) debit Bad Debt Expense, $16,500; credit Allowance for Doubtful Accounts, $16,500. C) debit Allowance for Doubtful Accounts, $500; credit Bad Debt Expense, $500. D) debit Bad Debt Expense, $500; credit Allowance for Doubtful Accounts, $500.

The estimate of uncollectible accounts is based on all of the following EXCEPT: A) forecasts of the future. B) past experience. C) industry averages. D) monthly cash expenses.

Allowance for Doubtful Accounts will have: A) an unadjusted credit balance at the end of the period if the write-offs during the period were more than the beginning balance. B) an unadjusted debit balance at the end of the period if the write-offs during the period were equal to the beginning balance. C) an unadjusted credit balance at the end of the period if the write-offs during the period were less than the beginning balance. D) an unadjusted debit balance at the end of the period if the write-offs during the period were less than the beginning balance.

The maturity value of a promissory note is: A) the discounted value of the note. B) the face value of the note plus the interest due to the maturity date. C) the face value of the note. D) its realizable value.

The journal entry to record a note received from a customer to apply on 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 Cash.

A 90-day, 12% note for $10,000, dated May 1, is received from a customer on account. Assuming a 360-day year, the maturity value of the note is: A) $9,700. B) $11,200. C) $10,000. D) $10,300.

The party to whom the promissory note is payable is the: A) None of these choices are correct. B) maker. C) payee. D) issuer.

On December 1, Bright Company receives a 6% interest-bearing note from Galvalume Company to settle a $20,000 account receivable. The note is due in 3 months. At December 31, Bright should record interest revenue of: A) $0. B) $600. C) $100. D) $200.

The rule is that an account becomes uncollectible: A) upon receipt of a certified letter from the debtor. B) There is no general rule as to when an account becomes uncollectible. C) when the debtor fails to pay a note on the due date. D) at the end of the fiscal year.

Under the allowance method of accounting for uncollectible accounts, Bad Debts Expense is debited: A) at the end of each accounting period. B) when an account is determined to be worthless. C) when a credit sale is past due. D) whenever a predetermined amount of credit sales has been made.

Establishing an Allowance for Doubtful Accounts under the allowance method is necessary because: A) a liability results when a credit sale is made. B) collection agencies use this account to accumulate attempts to collect worthless balances. C) uncollectible accounts that are written off must be accumulated in a separate account. D) estimates must be made when recording bad debt expense and it is not possible to know which specific accounts will not be collected.

Under the allowance method, when a specific account is written off: A) total assets will be unchanged. B) total assets will decrease. C) net income will decrease. D) total assets will increase.