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Establishing an Allowance for Doubtful Accounts under the allowance method is necessary because |
estimates must be made when recording bad debt expense and it is not possible to know which specific accounts will not be collected. |
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The number of days’ sales in receivables |
is an estimate of the length of time the receivables have been outstanding |
|
Under the allowance method, when a specific account is written off |
total assets will be unchanged |
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If Accounts Receivable for Crawford Company are equal to $172,000 and the Allowance for Doubtful Accounts are $4,500 at December 31, 2014, what is the amount of net receivables shown on Crawford’s balance sheet at December 31, 2014? |
$167,500 |
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The most common transaction for creating receivables is |
selling merchandise or services on credit |
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A note receivable due in 12 months is listed on the balance sheet under the caption |
current assets |
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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’s ledger indicates doubtful accounts of $16,000. Which of the following entries records the proper provision for doubtful accounts? |
Debit Bad Debt Expense, $15,500; credit Allowance for Doubtful Accounts, $15,500 |
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Financial statement data for year ending December 31, 2014, for Gore Co. is as follows: Determine accounts receivable turnover for 2014 |
6.91 ($4,250,000 / [($600,000 + $630,000) / 2] = 6.91 |
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A primary weakness of the direct write-off method is that |
the expense of a bad debt is not matched to the period that generated the uncollectible sale amount |
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If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited when a customer’s account is written off as uncollectible? |
Accounts Receivable |
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Notes and accounts receivable that result from sales transactions are sometimes called |
trade receivables |
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If Modern Company received $3,650 from Connor Young Company on March 12 for the total amount of an account which had been written off on March 1, the entry to reinstate the account under the direct write-off method would include: |
a credit to Bad Debt Expense of $3,650 |
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The maturity value of a promissory note is |
the face value of the note plus the interest due to the maturity date |
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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 |
$10,300 |
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Receivables are usually listed in order of |
liquidity |
|
The direct write-off method is required |
for federal income tax purposes |
|
Accounts receivable turnover is calculated by dividing |
net sales by average accounts receivable |
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The Allowance for Doubtful Accounts is |
subtracted from Accounts Receivable |
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Companies may sell their receivables. This practice is called |
factoring |
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If Modern Company received $3,650 from Connor Young Company on March 12 for the total amount of an account which had been written off on March 1, the entry to reinstate the account under the allowance method would include: |
a credit to Allowance for Doubtful Accounts of $3,650 |
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A 90-day, 10% note for $9,000, dated April 15, is received from a customer on account. The face value of the note is |
$9,000 |
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If Modern Company received $3,650 from Connor Young Company on March 12 for the total amount of an account which had been written off on March 1, the entry to record the cash receipt after the account has been reinstated under the direct write-off method |
is the same as it would be under the allowance method |
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The direct write-off method records bad debt expense |
only when an account is judged to be worthless |
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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 net sales. If net sales are $500,000, the adjusting entry for uncollectible accounts would include |
a credit to Allowance for Doubtful Accounts of $10,000 |
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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 customers ledger indicates doubtful accounts of $15,000. Which of the following entries records the proper provision for doubtful accounts? |
Debit Bad Debt Expense, $14,500; credit Allowance for Doubtful Accounts, $14,500 |
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