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Chapter Quiz
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1
To record a $100 of credit card sales with a 4% fee, the journal entry to record the deposit would include debit to Cash for $100.
A)True
B)False
2
Under the direct write off method, Allowance for Doubtful Accounts does not exist.
A)True
B)False
3
A company made most of its first year's sales on account, but it did not make the adjusting entry providing for bad debt losses. As a result, assets and owner's equity are understated.
A)True
B)False
4
At the end of the period, before the accounts are adjusted, Allowance for Doubtful Accounts has a credit balance of $2,710. If the estimate of uncollectible accounts determined by aging the accounts receivable is $3,930, the amount of the adjusting entry is $7,640.
A)True
B)False
5
Under the Allowance method of accounting for bad debts, write-offs of customer charge accounts considered uncollectible are credited to the Allowance for Doubtful Accounts.
A)True
B)False
6
The direct write-off method is most consistent with the accrual method of accounting.
A)True
B)False
7
Aging accounts refers to counting the number of days an account is old, or past due.
A)True
B)False
8
The Allowance for Doubtful Accounts is increased with a credit.
A)True
B)False
9
Allowance for Doubtful Accounts is a contra account to Accounts Receivable and provides an evaluation as to the net realizable value of Accounts Receivable.
A)True
B)False
10
At the end of the period, the balance of Allowance for Doubtful Accounts is reported on the income statement as an expense.
A)True
B)False
11
The purpose of the adjusting entry for bad debt losses is to attempt to match revenue earned during one year with expenses incurred during the same year.
A)True
B)False
12
When using the percent of sales method for estimating uncollectibles, the estimate of bad debts is the number used in the adjusting entry.
A)True
B)False
13
When using an accounts receivable method for estimating uncollectibles, the estimate of bad debts is the number used in the adjusting entry.
A)True
B)False
14
When using the allowance method to record bad debts of the period, the adjusting entry at period end would include a debit to the Bad Debts Expense account.
A)True
B)False
15
When using the allowance method to record bad debts of the period, the entry to WRITE OFF a customer's account would include a debit to the Bad Debts Expense account.
A)True
B)False
16
From aging its accounts receivable, Perry Company estimates that $850 of its accounts will be uncollectible. At this time, Allowance for Doubtful Accounts has a $260 credit balance. The adjusting entry is
A)debit Bad Debts Expense, $590; credit Allowance for Doubtful Accounts, $590.
B)debit Bad Debts Expense, $850; credit Accounts Receivable, $850.
C)debit Allowance for Doubtful Accounts, $850; credit Accounts Receivable, $850.
D)debit Allowance for Doubtful Accounts, $590; credit Bad Debts Expense, $590.
E)none of these.
17
Book value of accounts receivable refers to
A)the difference between net sales and net purchases.
B)the difference between net sales and the Bad Debts Expense balance.
C)the difference between net sales and the Accounts Receivable balance.
D)the difference between the Accounts Receivable balance and the Allowance for Doubtful Accounts balance.
E)none of these.
18
Cole Company estimates that its uncollectible accounts are 1% of net credit sales. At the end of a year, net credit sales amount to $66,000, and the Allowance for Doubtful Accounts has a debit balance of $400. The amount of the adjusting entry is
A)debit Allowance for Doubtful Accounts, $500; credit Bad Debts Expense, $500.
B)debit Bad Debts Expense, $660; credit Allowance for Doubtful Accounts, $660.
C)debit Allowance for Doubtful Accounts, $660; credit Bad Debts Expense, $660.
D)debit Bad Debts Expense, $500; credit Allowance for Doubtful Accounts, $500.
E)none of these.
19
The write-off of an uncollectible account under the allowance method is recorded by
A)debiting Allowance for Doubtful Accounts and crediting Accounts Receivable.
B)debiting Accounts Receivable and crediting Allowance for Doubtful Accounts.
C)debiting Allowance for Doubtful Accounts and crediting Bad Debts Expense.
D)debiting Bad Debts Expense and crediting Allowance for Doubtful Accounts.
E)none of these.
20
At the time the balance sheet is being prepared, based on aging Accounts Receivable, a company estimates that $3,600 of customer charge accounts will probably be uncollectible. If Allowance for Doubtful Accounts has a DEBIT balance of $400, the amount of the adjusting entry is
A)$400.
B)$3,600.
C)$3,200.
D)$4,000.
E)none of these.
21
The account Allowance for Doubtful Accounts, when subtracted from Accounts Receivable, results in
A)expected realizable value of accounts receivable.
B)net realizable value of accounts receivable.
C)book value of accounts receivable.
D)all of these.
E)none of these.
22
The classification and normal balance of Allowance for Doubtful Accounts are
A)liability, debit.
B)liability, credit.
C)contra asset, credit.
D)contra asset, debit.
E)none of these.
23
The matching principle pertaining to bad debt losses
A)requires the recording of an estimated amount of bad debt losses.
B)requires that bad debt losses be taken at the time they are recognized.
C)results in the recording of the actual amount of bad debt losses.
D)means that no bad debt losses are anticipated.
E)is none of these.
24
Under the direct write off method, a specific customer's account is written off by
A)debiting Bad Debts Expense and crediting Allowance for Doubtful Accounts.
B)debiting Allowance for Doubtful Accounts and crediting Accounts Receivable.
C)debiting Bad Debts Expense and crediting Accounts Receivable.
D)debiting Accounts Receivable and crediting Allowance for Doubtful Accounts.
E)doing none of these.
25
After the accounts are adjusted and closed at the end of the year, Allowance for Doubtful Accounts has a credit balance of $4,000, and Accounts Receivable has a balance of $90,300. The book value of Accounts Receivable is
A)$94,300.
B)$4,000.
C)$90,300.
D)$86,300.
E)none of these.
26
For a given year, a company estimates uncollectible accounts to be .5 percent of net sales of $234,000. Allowance for Doubtful Accounts has a credit balance of $350. The amount of the adjusting entry is
A)$1,490.
B)$870.
C)$11,350.
D)$1,000.
E)none of these.
27
The dollar amount of the bad debts expense can be estimated by
A)using a percentage of sales or net sales.
B)aging accounts receivable.
C)using a percentage of accounts receivable.
D)all of these.
E)none of these.
28
At the time the balance sheet is being prepared, based on aging Accounts Receivable, a company estimates that $3,600 of customer charge accounts will probably be uncollectible. If Allowance for Doubtful Accounts has a CREDIT balance of $400, the amount of the adjusting entry is
A)$400.
B)$3,600.
C)$3,200.
D)$4,000.
E)none of these.
29
If a company's net sales equals $400,000 and the average accounts receivable was 28,000. What is the company's accounts receivable turnover (rounded)
A).07 times
B)14.29 times.
C)$14.29
D)7 times.
E)none of these.
30
The journal entry to write off a $150 account receivable under the allowance method would include a
A)debit to Accounts Receivable for $150
B)credit to Allowance for Doubtful Accounts for $150
C)debit to Bad Debt Expense for $150
D)credit to Accounts Receivable for $150
E)none of these.





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