The account Allowance for Doubtful Accounts is classified as a[n]
a]expense.
b]contra account to Accounts Receivable.
C]liability.
d]contra account of Bad Debt Expense
b
Under the allowance method, Bad Debt Expense is recorded
a when the loss amount is known.
b for an amount that the company estimates it will not collect.
c several times during the accounting period.
d when an individual account is written off.
b
The expense recognition principle relates to credit losses by stating that bad debt expense should be recorded
a in the period of the loss.
b in the same period as allowed for tax purposes.
c for an exact amount.
d in the period of the sale.
d
Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited
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a at the end of each accounting period.
b whenever a pre-determined amount of credit sales have been made.
c when an account is determined to be uncollectible.
d when a credit sale is past due.
c
Two methods of accounting for uncollectible accounts are the
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a direct write-off method and the allowance method.
b allowance method and the net realizable method.
c allowance method and the accrual method.
d direct write-off method and the accrual method.
a
You have just received notice that a customer of yours with an account receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to
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a debit Bad Debt Expense and credit Allowance for Doubtful Accounts.
b debit Allowance for Doubtful Accounts and credit Accounts Receivable.
c debit Allowance for Doubtful Accounts and credit Bad Debt Expense.
d debit Bad Debt Expense and credit Accounts Receivable.
b
Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $250000 and credit sales are $1000000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2500 before adjustment?
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a Bad Debt Expense
7500
Accounts
Receivable
7500
b Bad Debt Expense
10000
Accounts Receivable
10000
c Bad Debt Expense
10000
Allowance for Doubtful Accounts
10000
d] Bad Debt Expense
7500
Allowance for Doubtful Accounts
7500
d
Net credit sales for the month are $800,000. The accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables
balance using the percentage-of-receivables basis. If Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment, what is the balance after adjustment?
[a]$12,000.
[b]$7,000.
[c]$17,000.
[d]$31,000.
a
[LO 3]
Which of these statements about promissory notes is incorrect?
[a]The party making the promise to pay is called the maker.
[b]The party to whom payment is to be
made is called the payee.
[c]A promissory note is not a negotiable instrument.
[d]A promissory note is more liquid than an account receivable.
c
.
[LO 4]
If a company is concerned about extending credit to a risky customer, it could do any of the following except:
[a]require the customer to pay cash in advance.
[b]require the customer to provide a letter of credit or a bank
guarantee.
[c]contact references provided by the customer, such as banks and other suppliers.
[d]provide the customer a lengthy payment period to increase the chance of paying.
d
Cuso Company purchased equipment on January 1, 2016, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated
depreciation at December 31, 2017, if the straight-line method of depreciation is used?
[a]$80,000.
[b]$160,000.
[c]$78,000.
[d]$156,000.
d
[LO 2]
A company would minimize its depreciation expense in the first year of owning an asset if it used:
[a]a high estimated life, a high salvage value, and declining-balance depreciation.
[b]a low estimated life, a high salvage value, and straight-line
depreciation.
[c]a high estimated life, a high salvage value, and straight-line depreciation.
[d]a low estimated life, a low salvage value, and declining-balance depreciation
c
[LO 4]
Indicate which one of these statements is true.
[a]Since intangible assets lack physical substance, they need to be disclosed only in the notes to the financial statements.
[b]Goodwill should be reported as a contra
account in the stockholders' equity section.
[c]Totals of major classes of assets can be shown in the balance sheet, with asset details disclosed in the notes to the financial statements.
[d]Intangible assets are typically combined with plant assets and inventory and then shown in the property, plant, and equipment section.
c
[LO 2]
The market interest rate:
[a]is the contractual interest rate used
to determine the amount of cash interest paid by the borrower.
[b]is listed in the bond indenture.
[c]is the rate investors demand for loaning funds.
[d]More than one of the above is true.
c
[LO 4]
Which of the following is not a measure of liquidity?
[a]Debt to assets ratio.
[b]Working capital.
[c]Current ratio.
[d]Current cash debt coverage.
a