Docsity
Docsity

Prepare for your exams
Prepare for your exams

Study with the several resources on Docsity


Earn points to download
Earn points to download

Earn points by helping other students or get them with a premium plan


Guidelines and tips
Guidelines and tips

Chapter 8 Questions Multiple Choice, Slides of Accounting

Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited a. when a credit sale is past due.

Typology: Slides

2021/2022

Uploaded on 09/12/2022

attourney
attourney 🇬🇧

3.8

(11)

228 documents

1 / 13

Toggle sidebar

This page cannot be seen from the preview

Don't miss anything!

bg1
Chapter 8 Question Review 1
Chapter 8 Questions
Multiple Choice
1. When customers make purchases with a national credit card, the retailer
a. is responsible for maintaining customer accounts.
b. is not involved in the collection process.
c. absorbs any losses from uncollectible accounts.
d. receives cash equal to the full price of the merchandise sold from the credit card company.
2. The two methods of accounting for uncollectible accounts are the direct write-off method and the
a. Accrual Method
b. Net Realizable Method
c. Bad Debt Method
d. Allowance Method
3. A 90-day note dated April 20 would mature on
a. July 19
b. July 21
c. July 20
d. July 18
4. Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is
debited
a. when a credit sale is past due.
b. at the end of each accounting period.
c. whenever a pre-determined amount of credit sales have been made.
d. when an account is determined to be uncollectible.
5. An aging of a company's accounts receivable indicates that $6,000 are estimated to be uncollectible.
If Allowance for Doubtful Accounts has a $2,000 debit balance, the adjustment to record bad debts for
the period will require a
a. debit to Bad Debt Expense for $8,000.
b. debit to Allowance for Doubtful Accounts for $8,000.
c. debit to Bad Debt Expense for $4,000.
d. credit to Allowance for Doubtful Accounts for $4,000.
6. The face value of a note refers to the amount
a. that can be received if sold to a factor.
b. borrowed plus interest received at maturity from the maker.
c. at which the note receivable is recorded.
d. remaining after a service charge has been deducted.
7. The interest on a $10,000, 9%, 90-day note receivable is
a. $225.
b. $900.
c. $75.
d. $150.
pf3
pf4
pf5
pf8
pf9
pfa
pfd

Partial preview of the text

Download Chapter 8 Questions Multiple Choice and more Slides Accounting in PDF only on Docsity!

Chapter 8 Questions

Multiple Choice

  1. When customers make purchases with a national credit card, the retailer a. is responsible for maintaining customer accounts. b. is not involved in the collection process. c. absorbs any losses from uncollectible accounts. d. receives cash equal to the full price of the merchandise sold from the credit card company.
  2. The two methods of accounting for uncollectible accounts are the direct write-off method and the a. Accrual Method b. Net Realizable Method c. Bad Debt Method d. Allowance Method
  3. A 90-day note dated April 20 would mature on a. July 19 b. July 21 c. July 20 d. July 18
  4. Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited a. when a credit sale is past due. b. at the end of each accounting period. c. whenever a pre-determined amount of credit sales have been made. d. when an account is determined to be uncollectible.
  5. An aging of a company's accounts receivable indicates that $6,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $2,000 debit balance, the adjustment to record bad debts for the period will require a a. debit to Bad Debt Expense for $8,000. b. debit to Allowance for Doubtful Accounts for $8,000. c. debit to Bad Debt Expense for $4,000. d. credit to Allowance for Doubtful Accounts for $4,000.
  6. The face value of a note refers to the amount a. that can be received if sold to a factor. b. borrowed plus interest received at maturity from the maker. c. at which the note receivable is recorded. d. remaining after a service charge has been deducted.
  7. The interest on a $10,000, 9%, 90-day note receivable is a. $225. b. $900. c. $75. d. $150.
  1. Doane Company receives a $10,000, 3-month, 6% promissory note from Ray Company in settlement of an open accounts receivable. What entry will Doane Company make upon receiving the note? a. Notes Receivable 10, Accounts Receivable—Ray Company 10, b. Notes Receivable 10, Accounts Receivable—Ray Company 10, Interest Revenue 150 c. Notes Receivable 10, Interest Receivable 150 Accounts Receivable—Ray Company 10, Interest Revenue 150 d. Notes Receivable 10, Accounts Receivable—Ray Company 10,
  2. 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.
  3. When the allowance method of accounting for uncollectible accounts is used, Bad Debt Expense is recorded a. in the year after the credit sale is made. b. in the same year as the credit sale. c. as each credit sale is made. d. when an account is written off as uncollectible.
  4. To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a a. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. b. debit to Bad Debt Expense 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.
  5. Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful Accounts is $6, credit before adjustment, what is the amount of bad debt expense for that period? a. $45, b. $39, c. $51, d. $6,

EXERCISES

1. Strickman Company uses the allowance method for estimating uncollectible accounts. Prepare

journal entries to record the following transactions: January 5 Sold merchandise to Sue Land for $1,800, terms n/15. April 15 Received $400 from Sue Land on account. August 21 Wrote off as uncollectible the balance of the Sue Land account when she declared bankruptcy. October 5 Unexpectedly received a check for $650 from Sue Land.

2. Compute the maturity value as indicated for each of the following notes receivable.

A. A $9,000, 6%, 3-month note dated July 20. Maturity value $____________. B. A $16,000, 9%, 150-day note dated August 5. Maturity value $____________. Date Debit Credit

3. Merry Co. sells Christmas angels. Merry determines that at the end of December, they have the

following aging schedule of Accounts Receivable: Customer Total Number of Days Past Due Not yet due 1 – 30 31 – 60 61 – 90 Over 90 K. Brant $500 $300 $ D. Eaton 300 100 200 S Klein 150 50 100 C. Sheen 200 200 ? 300 300 250 200 100 % uncollectible 1% 5% 10% 25% 50% Total Estimated Uncollectible Amounts?????? (a) Compute the total estimated uncollectible amounts. (b) Compute the net receivables based on the above information at the end of December (There was no beginning balance in the Allowance for Doubtful Accounts).

5. Prepare journal entries to record the following transactions entered into by the Merando

Company: 20X June 1 Received a $10,000, 6%, 1-year note from Dan Gore as full payment on his account. Nov. 1 Sold merchandise on account to Barlow, Inc., for $14,000, terms 2/10, n/30. Nov. 5 Barlow, Inc., returned merchandise worth $1,000. Nov. 9 Received payment in full from Barlow, Inc. Dec. 31 Accrued interest on Gore's note. 20X June 1 Dan Gore honored his promissory note by sending the face amount plus interest. Date Debit Credit

6. Erickson Company had a $300 credit balance in Allowance for Doubtful Accounts at December 31, 20XX, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following: Estimated Percentage Uncollectible Current Accounts $170,000 1% 1 – 30 days past due 15,000 3% 31 – 60 days past due 12,000 6% 61 – 90 days past due 5,000 15% Over 90 days past due 9,000 30% Total Accounts Receivable $211, (a) Prepare the adjusting entry on December 31, 20XX, to recognize bad debts expense. (b) Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $300 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's provision for uncollectible accounts. Date Debit Credit Date Debit Credit

Chapter 8 Solutions

Exercise Solutions (Cont.)

A. Maturity value: $9,

Interest = $9,000 x 6% x (3/ 12 ) = $

$135 + $9,000 = $9,135 (Face val. + (Face val. × 6% × 3/12) B. Maturity value: $16,

Interest = $16,000 x 9% x (150/ 360 ) = $

$600 + $16,000 = $16,600 (Face val. + (Face val. × 9% × 150/360) 3. Customer Total Not yet due Number of Days Past Due 1 – 30 31 – 60 61 – 90 Over 90 K. Brant $500 $300 $ D. Eaton 300 100 200 S Klein 150 50 100 C. Sheen 200 200 1,150 300 300 250 200 100 % uncollectible 1% 5% 10% 25% 50% Total Estimated Uncollectible Amounts (a) $143 $3 $15 $25 $ 50 $ (b) $1,150 – $143 = $1,

Chapter 8 Solutions

Exercise Solutions (Cont.)

4. (a) Debit Credit Accounts Receivable 1,550, Sales Revenue 1,550, (To record credit sales) Sales Returns and Allowances 100, Accounts Receivable 100, (To record credits to customers) Cash 1,250, Accounts Receivable 1,250, (To record collection of receivables) Allowance for Doubtful Accounts 35, Accounts Receivable 35, (To write off specific accounts) Accounts Receivable 8, Allowance for Doubtful Accounts 8, (To reverse write-off of account) Cash 8, Accounts Receivable 8, (To record collection of account)

Estimated Percentage Estimated Uncollectible Uncollectible Current Accounts $170,000 1% $1, 1 – 30 days past due 15,000 3% 450 31 – 60 days past due 12,000 6% 720 61 – 90 days past due 5,000 15% 750 Over 90 days past due 9,000 30% 2, Total Accounts Receivable $211,000 $6,320* **(A/R amounts × est. uncoll. %) (a) Bad Debt Expense ..................................................................................... 6, Allowance for Doubtful Accounts ($6,320 – $300) ........................ 6, (To adjust the allowance account to total estimated uncollectible) (Est. uncoll. amount – end. ADA bal.) (b) Bad Debt Expense ..................................................................................... 6, Allowance for Doubtful Accounts ($6,320 + $300) ........................ 6, (To adjust the allowance account to total estimated uncollectible)