ACCN 2010 Quiz 8

ACCN 2010 Quiz 8 | Tulane University

Question 1

Allowance for Doubtful Accounts on the balance sheet

is offset against total current assets.

is deducted from accounts receivable.

increases the cash realizable value of accounts receivable.

appears under the heading "Other Assets."

 

Question 2

When an account is written off using the allowance method, accounts receivable

·         decreases and the allowance account increases.

·         increases and the allowance account increases.

·         decreases and the allowance account decreases.

·         is unchanged and the allowance account increases.

 

Question 3

Nash's Trading Post, LLC uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $100000 and credit sales are $1000000. Management estimates that 3% of accounts receivable will be uncollectible. What adjusting entry will Nash's Trading Post, LLC make if the Allowance for Doubtful Accounts has a credit balance of $1000 before adjustment?

·         Bad Debt Expense           2000      

o   Allowance for Doubtful Accounts                             2000

 

·         Bad Debt Expense           3000      

o   Allowance for Doubtful Accounts                             3000

 

·         Bad Debt Expense           3000      

o   Accounts Receivable                      3000

 

·         Bad Debt Expense           2000      

o   Accounts Receivable                      2000

 

Question 4

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $50500. If the balance of the Allowance for Doubtful Accounts is a $6100 credit before adjustment, what is the amount of bad debt expense for that period?

·         $6100

·         $44400  

·         $50500

·         $56600

 

Question 5

In 2022 the Sheridan Company had net credit sales of $850000. On January 1, 2022, the Allowance for Doubtful Accounts had a credit balance of $21400. During 2022, $32500 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 5% of the balance in receivables (percentage-of-receivables basis). If the accounts receivable balance at December 31 was $225000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2022?

·         $32650.

·         $22350.

·         $11250.  

·         $32500.

 

Question 6.

During 2022 Novak Corp. had sales on account of $556000, cash sales of $236000, and collections on account of $345000. In addition, they collected $7700 which had been written off as uncollectible in 2021. As a result of these transactions the change in the accounts receivable balance from the beginning of the year to the end of the year indicates a

·         $211000 increase.

·         $439300 increase.

·         $203300 increase.

·         $447000 increase.

 

Question 7

Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable be estimated at the end of the accounting period?

·         The IRS rules require the company to make the estimate.

·         To match bad debt expense to the period in which the revenues were earned.

·         To determine the gross realizable value of accounts receivable.

·         To allow the collection department to schedule work for the next accounting period.

 

Question 8

A high accounts receivable turnover ratio indicates

·         a large proportion of the company's sales are on credit.

·         the company's sales are increasing.

·         customers are making payments slowly.

·         customers are making payments very quickly.

 

Question 9

The financial statements of the Whispering Winds Corp. report net sales of $265200 and accounts receivable of $70000 and $32000 at the beginning of the year and the end of the year, respectively. What is the accounts receivable turnover for Whispering?

·         8.2 times

·         4.2 times

·         5.2 times  

·         2.6 times

 

Question 10

The financial statements of the Skysong, Inc. report net sales of $348000 and accounts receivable of $58800 and $36000 at the beginning of the year and the end of the year, respectively. What is the average collection period for accounts receivable in days? (Use 365 days for calculation.

·         49.7

·         39.5

·         90.2

·         59.8

 

Question 11

Selling accounts receivables to factors and allowing credit terms such as 2/10, n/30

·         represent common business practices.

·         represent ways to accelerate receivables collections.

·         result in collections that are less than the gross accounts receivable.

·         all of these answer choices are correct.

 

Question 12

The receivable that is usually evidenced by a formal instrument of credit is a(n)

·         accounts receivable.

·         income tax receivable.

·         trade receivable.

·         note receivable.

 

Question 13

On January 15, Swifty Corporation sells merchandise on account to Blue Spruce Associates for $5900 with terms 2/10, n/30. On January 20, Blue Spruce returns merchandise worth $1400 to Swifty. On January 24, payment is received from Blue Spruce for the balance due. What is the amount of cash received?

·         $3300

·         $4382

·         $4410  

·         $4500

 

Question 14

The account Allowance for Doubtful Accounts is classified as a(n)

·         contra account to Bad Debt Expense.

·         expense.

·         liability.

·         contra account to Accounts Receivable.

 

Question 15

The collection of an account that had been previously written off under the allowance method of accounting for uncollectible accounts

·         requires a correcting entry for the period in which the account was written off.

·         will increase income in the period it is collected.

·         does not affect income in the period it is collected.  

·         will decrease income in the period it is collected.

 

Question 16

A debit balance in the Allowance for Doubtful Accounts

·         indicates that actual bad debt write-offs have been less than what was estimated.

·         is the normal balance for that account.

·         indicates that actual bad debt write-offs have exceeded previous provisions for bad debts

·         cannot occur if the percentage of receivables method of estimating bad debts is used.

 

 

Question 17

Bad Debt Expense is reported on the income statement as

·         an operating expense.

·         an expense subtracted from net sales to determine gross profit.

·         part of cost of goods sold.

·         a contra revenue account.

 

Question 18

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

·         debit to Loss on Credit Sales and a credit to Accounts Receivable.

·         debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.

·         debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.

·         debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.

 

Question 18

Which one of the following statements is true?

·         Bad Debts Expense is a real account and remains open at the end of the fiscal period, while Allowance for Doubtful Accounts is a nominal account and is closed at the end of the fiscal period.

·         Bad Debts Expense and Allowance for Doubtful Accounts are both real accounts and neither are closed at the end of the fiscal period.

·         Bad Debts Expense is a nominal account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a real account and remains open at the end of the fiscal period.

·         Bad Debts Expense and Allowance for Doubtful Accounts are both nominal accounts and are closed at the end of the fiscal period.

Question 19

Which one of the following is the correct presentation of Accounts Receivable and its contra account on the balance sheet?