ACCT 2101 EXAM 3 QUESTIONS WITH
CORRECT ANSWERS
Credit Card Sales (pp387&388)
Sales made by a company that allows customers to pay with a third party credit card: Why
would they do this? - CORRECT ANSWER ✔✔1)Seller does not have to decide who gets credit
and how much
2)Seller avoids the risk of the customer not paying
3)Seller typically receives cash from the credit card company sooner than if they were waiting
for customers to pay them back directly
4) more credit options for customers can lead to more sales
A company sells merchandise to a customer on credit. The journal entry that the company
makes to record this sale would include a (debit/credit) to the sales account. - CORRECT
ANSWER ✔✔CREDIT
An accounts receivable ledger: - CORRECT ANSWER ✔✔-Is a supplementary record to maintain
an account for each customer.
-Records journal entries that affect accounts receivable.
In September, DK Company sells merchandise to Lions Company on credit. In October, Lions
Company pays the balance in full. The entry to record the collection of cash by DK Company in
October will include a (debit/credit) to Accounts Receivable. - CORRECT ANSWER ✔✔CREDIT
On February 15, Smyth Co. determines that it cannot collect $500 owed by its customer, A.
Winds. Smyth records the loss using the direct write-off method. This entry to record the write-
off on February 15 would include a: - CORRECT ANSWER ✔✔-Debit to Bad Debt Expense.
, -Credit to Accounts Receivable - A. Winds.
In July, Lane Co. sells merchandise to Avery Co. on account. In August, Avery pays the balance in
full. The entry that Lane will make to record the receipt of cash will include a credit to the
_________ account. - CORRECT ANSWER ✔✔Accounts Receivable
The direct write-off method records bad debts expense only when an account becomes
uncollectible, which is not always in the same period as the sale. For this reason, the direct
write-off method violates the _______ __________ principle. - CORRECT ANSWER ✔✔Expense
Recognition
On August 1, Hanes Co. determines it cannot collect $150 from a customer. Hanes uses the
direct write-off method. Hanes will record the write-off of this account by debiting: - CORRECT
ANSWER ✔✔Bad Debts Expense for $150
JD Co. had $1,000 of credit card sales. The net cash receipts were deposited immediately into JD
Company's bank account less a 3% fee. The entry to record this sales transaction would include
the following DEBIT entries: - CORRECT ANSWER ✔✔-Credit Card Expense for $30
-Cash for $970
Conroy Company uses the allowance method to account for bad debts. During 2010, Conroy
determined that a balance of $200 for Alegia Co. was uncollectible and wrote the balance off.
What is the total decrease to net income related to this entry? - CORRECT ANSWER ✔✔$0
The decrease in net income occurs when bad debts is estimated (allowance account is
increased).
Acel Co. uses the allowance method to account for bad debts. Early in 2010, Acel determined
that it could not collect $400 from CTR, Inc. and wrote the balance off. On October 21, Acel
received a check for $400 from CTR. The entries to record the receipt of cash on October 21
would include a debit to: - CORRECT ANSWER ✔✔-Cash
-Accounts Receivable
CORRECT ANSWERS
Credit Card Sales (pp387&388)
Sales made by a company that allows customers to pay with a third party credit card: Why
would they do this? - CORRECT ANSWER ✔✔1)Seller does not have to decide who gets credit
and how much
2)Seller avoids the risk of the customer not paying
3)Seller typically receives cash from the credit card company sooner than if they were waiting
for customers to pay them back directly
4) more credit options for customers can lead to more sales
A company sells merchandise to a customer on credit. The journal entry that the company
makes to record this sale would include a (debit/credit) to the sales account. - CORRECT
ANSWER ✔✔CREDIT
An accounts receivable ledger: - CORRECT ANSWER ✔✔-Is a supplementary record to maintain
an account for each customer.
-Records journal entries that affect accounts receivable.
In September, DK Company sells merchandise to Lions Company on credit. In October, Lions
Company pays the balance in full. The entry to record the collection of cash by DK Company in
October will include a (debit/credit) to Accounts Receivable. - CORRECT ANSWER ✔✔CREDIT
On February 15, Smyth Co. determines that it cannot collect $500 owed by its customer, A.
Winds. Smyth records the loss using the direct write-off method. This entry to record the write-
off on February 15 would include a: - CORRECT ANSWER ✔✔-Debit to Bad Debt Expense.
, -Credit to Accounts Receivable - A. Winds.
In July, Lane Co. sells merchandise to Avery Co. on account. In August, Avery pays the balance in
full. The entry that Lane will make to record the receipt of cash will include a credit to the
_________ account. - CORRECT ANSWER ✔✔Accounts Receivable
The direct write-off method records bad debts expense only when an account becomes
uncollectible, which is not always in the same period as the sale. For this reason, the direct
write-off method violates the _______ __________ principle. - CORRECT ANSWER ✔✔Expense
Recognition
On August 1, Hanes Co. determines it cannot collect $150 from a customer. Hanes uses the
direct write-off method. Hanes will record the write-off of this account by debiting: - CORRECT
ANSWER ✔✔Bad Debts Expense for $150
JD Co. had $1,000 of credit card sales. The net cash receipts were deposited immediately into JD
Company's bank account less a 3% fee. The entry to record this sales transaction would include
the following DEBIT entries: - CORRECT ANSWER ✔✔-Credit Card Expense for $30
-Cash for $970
Conroy Company uses the allowance method to account for bad debts. During 2010, Conroy
determined that a balance of $200 for Alegia Co. was uncollectible and wrote the balance off.
What is the total decrease to net income related to this entry? - CORRECT ANSWER ✔✔$0
The decrease in net income occurs when bad debts is estimated (allowance account is
increased).
Acel Co. uses the allowance method to account for bad debts. Early in 2010, Acel determined
that it could not collect $400 from CTR, Inc. and wrote the balance off. On October 21, Acel
received a check for $400 from CTR. The entries to record the receipt of cash on October 21
would include a debit to: - CORRECT ANSWER ✔✔-Cash
-Accounts Receivable
