MGMT 200 CHAPTER 5 EXAM
QUESTIONS AND CORRECT
ANSWERS
Two entries are required when a previously written off account is collected. These two
entries include:
a. reinstate the account receivable
b. record the adjustment to sales
c. record the collection on the account receivable
d. record bad debt expense - Answer-a, c
Ophelia Inc. just learned that Patton Inc., one of its customers with an outstanding
accounts receivable balance, filed for bankruptcy. Assuming that the company utilizes
the allowance method, Ophelia should record a(n):
a. increase in Accounts Receivable
b. decrease in Sales Revenue
c. increase in Sales Revenue
d. increase in Allowance for Doubtful Accounts
e. decrease in Accounts Receivable - Answer-e
Compared to other methods of estimating uncollectible accounts, the aging of accounts
receivables method tends to
a. result in the highest net income.
b. be more accurate.
c. recognize bad debts earlier.
d. result in the lowest net income. - Answer-b
Joyce Corp. uses the percentage-of-receivables method to account for bad debt
expense. Joyce determines that a customer account of $20,000 should be written off as
uncollectible. The write off of the account will include which of the following entries?
a. Debit Bad Debt Expense
b. Credit to Accounts Receivable
c. Debit to Allowance for Uncollectible Accounts
d. Credit Allowance for Uncollectible Accounts - Answer-b, c
When the allowance method is used, the write-off of an uncollectible account:
a. increases net income
b. decreases net income
c. has no effect on net income - Answer-c
, The direct write-off method is used when
a. bad debts are expected to be material in amount.
b. uncollectible accounts are not anticipated or are immaterial.
c. a company expects excessive sales returns.
d. a company elects to use this method as one of several alternatives. - Answer-b
Amend Inc. debited Accounts Receivable and credited Allowance for Doubtful Accounts
to reestablish an account previously written off. Amend Inc. should also debit _______
and credit _______.
a. Cash; Allowance for Uncollectible Accounts
b. Accounts Receivable; Cash
c. Cash; Accounts Receivable
d. Allowance for Uncollectible Accounts; Cash - Answer-c
The Accounts Receivable account is reduced when the seller:
a. determines that a specific customer account will not be collectible
b. records the allowance for uncollectible accounts
c. adopts the allowance method - Answer-a
A formal, signed credit agreement between a lender and a borrower is called a(n) _____
by the lender.
a. account receivable.
b. note receivable.
c. note payable.
d. account payable. - Answer-b
The approach that considers the age of various accounts receivables to estimate
uncollectible accounts is referred to as the ________ method of accounts receivable.
(Enter only one word.) - Answer-aging
Shannon Corp. uses the aging method to account for bad debt expense. Shannon
determines that a customer account of $10,000 should be written off as uncollectible.
The write off of the account will include
a. debit Accounts Receivable.
b. debit Allowance for Uncollectible Accounts.
c. credit Sales Returns and Allowances.
d. debit Bad Debt Expense. - Answer-b
The direct write-off method is required for
a. IFRS reporting purposes.
b. income tax purposes.
c. U.S. GAAP reporting purposes. - Answer-b
When an account previously written off is collected in full, which is required to ensure
the accounting for the complete payment history of the customer?
QUESTIONS AND CORRECT
ANSWERS
Two entries are required when a previously written off account is collected. These two
entries include:
a. reinstate the account receivable
b. record the adjustment to sales
c. record the collection on the account receivable
d. record bad debt expense - Answer-a, c
Ophelia Inc. just learned that Patton Inc., one of its customers with an outstanding
accounts receivable balance, filed for bankruptcy. Assuming that the company utilizes
the allowance method, Ophelia should record a(n):
a. increase in Accounts Receivable
b. decrease in Sales Revenue
c. increase in Sales Revenue
d. increase in Allowance for Doubtful Accounts
e. decrease in Accounts Receivable - Answer-e
Compared to other methods of estimating uncollectible accounts, the aging of accounts
receivables method tends to
a. result in the highest net income.
b. be more accurate.
c. recognize bad debts earlier.
d. result in the lowest net income. - Answer-b
Joyce Corp. uses the percentage-of-receivables method to account for bad debt
expense. Joyce determines that a customer account of $20,000 should be written off as
uncollectible. The write off of the account will include which of the following entries?
a. Debit Bad Debt Expense
b. Credit to Accounts Receivable
c. Debit to Allowance for Uncollectible Accounts
d. Credit Allowance for Uncollectible Accounts - Answer-b, c
When the allowance method is used, the write-off of an uncollectible account:
a. increases net income
b. decreases net income
c. has no effect on net income - Answer-c
, The direct write-off method is used when
a. bad debts are expected to be material in amount.
b. uncollectible accounts are not anticipated or are immaterial.
c. a company expects excessive sales returns.
d. a company elects to use this method as one of several alternatives. - Answer-b
Amend Inc. debited Accounts Receivable and credited Allowance for Doubtful Accounts
to reestablish an account previously written off. Amend Inc. should also debit _______
and credit _______.
a. Cash; Allowance for Uncollectible Accounts
b. Accounts Receivable; Cash
c. Cash; Accounts Receivable
d. Allowance for Uncollectible Accounts; Cash - Answer-c
The Accounts Receivable account is reduced when the seller:
a. determines that a specific customer account will not be collectible
b. records the allowance for uncollectible accounts
c. adopts the allowance method - Answer-a
A formal, signed credit agreement between a lender and a borrower is called a(n) _____
by the lender.
a. account receivable.
b. note receivable.
c. note payable.
d. account payable. - Answer-b
The approach that considers the age of various accounts receivables to estimate
uncollectible accounts is referred to as the ________ method of accounts receivable.
(Enter only one word.) - Answer-aging
Shannon Corp. uses the aging method to account for bad debt expense. Shannon
determines that a customer account of $10,000 should be written off as uncollectible.
The write off of the account will include
a. debit Accounts Receivable.
b. debit Allowance for Uncollectible Accounts.
c. credit Sales Returns and Allowances.
d. debit Bad Debt Expense. - Answer-b
The direct write-off method is required for
a. IFRS reporting purposes.
b. income tax purposes.
c. U.S. GAAP reporting purposes. - Answer-b
When an account previously written off is collected in full, which is required to ensure
the accounting for the complete payment history of the customer?
