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Exam 5: Receivables and Sales

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Question 61

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Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ Contra asset that represents the estimated amount of future bad debts.

A) Accounts receivable
B) Allowance method
C) No effect
D) Direct write-off method
E) Net realizable value
F) Aging method
G) Bad debt expense
H) Receivables written off
I) Decrease assets and increase expenses
J) Allowance for uncollectible accounts

K) E) and F)
L) C) and H)

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Question 62

Multiple Choice

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Tom's Textiles shipped the wrong material to a customer, who refused to accept the order. This is an example of a:

A) Sales Revenue.
B) Sales discount.
C) Sales return.
D) Sales allowance.

E) None of the above
F) B) and C)

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Question 63

Multiple Choice

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Accounts receivable are normally reported at the:

Tom's Textiles shipped the wrong material to a customer, who refused to accept the order. Upon receipt of the material, Tom's would credit Accounts Receivable and debit:

At the end of 2012, Murray State Lenders had a balance in its Allowance for Uncollectible Accounts of $4,500 (credit) before any adjustment. The company estimated its future uncollectible accounts to be $12,000 using the percentage-of-receivables method. Murray State's adjustment on December 31, 2012, to record its estimated uncollectible accounts included a:

Even though the percentage-of-receivables method and the percentage-of-credit-sales method use different accounts to estimate future uncollectible accounts, the amount of bad debt expense reported in the income statement will always be the same under the two methods.

Which of the following is recorded by a credit to Accounts Receivable?

When using an aging method for estimating uncollectible accounts:

The adjustment to account for future bad debts has the effect of (1) reducing assets and (2) increasing liabilities.

Gershwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. The price reduction is an example of a:

A company uses the allowance method to account for uncollectible accounts. During the year, the company has actual bad debts of $25,000. Record the write-off of the uncollectible accounts.

From an income statement perspective, the percentage-of-credit-sales method is typically preferable because it better matches the revenues (credit sales) with their related expenses (bad debts).

A company collects an account receivable previously written off. Indicate how this transaction would affect the following five financial statement items:

A sales allowance is recorded as a debit to Accounts Receivable and a credit to Sales Allowances.

A company offers a 20% trade discount when providing services of $5,000 or more to its customers. Record the transaction when the company provides services of $8,000 (not including the trade discount) on account.

On March 17, Jackal Lumber sold building materials to Fredo Limited for $15,000 with terms of 3/10, net 20. What amount did Jackal record as revenue on March 25 when Fredo paid for the building materials?

Accounts receivable are reported at their net realizable value.

Accrued interest on a note receivable has the effects of increasing assets and increasing liabilities.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ The amount of the adjustment to the allowance for uncollectible accounts during the period.

A company has the following balances on December 31, 2012, after year-end adjustments: Accounts Receivable = $62,000; Allowance for Uncollectible Accounts = $6,000. Calculate the net realizable value of accounts receivable.