1.Interest is usually associated with
a.accounts receivable.
b.notes receivable.
c.doubtful accounts.
d.bad debts.
2.Which one of the following is not a primary accounting issue associated with accounts receivable?
a.Amortizing accounts receivable
b.Recognizing accounts receivable
c.Valuing accounts receivable
d.Accelerating cash receipts from receivables
Use the following information for question 3
A customer uses their Gary’s Spot Shop Credit Card to charge a treadmill at Gary’s Sport Shop. The price is ,000 and the financing charge is 18% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer’s account.
3.What is the amount of the finance charge?
a..
b..
c.0.
d..
4.If a company fails to record estimated bad debts expense,
a.net realizable value is understated.
b.expenses are understated.
c.revenues are understated.
d.receivables are understated.
5.When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when
a.a sale is made.
b.an account becomes bad and is written off.
c.management estimates the amount of uncollectibles.
d.a customer’s account becomes past-due.
6.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 sales approach of estimating bad debts is used.
7.Two ways of estimating uncollectible accounts are the
a.allowance method and the percentage of sales approach.
b.allowance method and the percentage of receivables approach.
c.percentage of sales approach and the percentage of receivables approach.
d.allowance method and the accrual method.
8.Under the allowance method of accounting for uncollectible accounts,
a.the net realizable value of accounts receivable is greater before an account is written off than after it is written off.
b.Bad Debts Expense is debited when a specific account is written off as uncollectible.
c.the net realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.
d.Allowance for Doubtful Accounts is closed each year to the owner’s capital account.
9.In 2007, Able Co. wrote off a ,000 accounts receivable from Kane Limited. In late 2008, Kane paid the full amount of the receivable. After the repayment has been recorded, the balance in
a.accounts receivable will be ,000 higher.
b.bad debt expense will be ,000 lower.
c.accounts receivable will be the same as before the collection was recorded.
d.allowance for doubtful accounts will be ,000 lower.
Use the following information for question 10:
Neil Construction Co. receives a note receivable from Sonny Plastics Inc. as settlement of an overdue account receivable. The note is for three months and bears an annual interest rate of 8%. The original accounts receivable balance was 0.
10.When the note is collected, Neil Construction Co. will recognize interest revenue of
a..
b.4.
c..
d.6.