ACCT 2010 Exam 3 Questions and All
Correct Answers.
Accounts Receivable - Answer Amounts owed to a business by its customers.
Aging of Accounts Receivable Method - Answer Estimates uncollectible accounts based on the
age of each account receivable. also called the balance sheet approach.
Allowance Method - Answer A method of accounting that reduced accounts receivable (as
well as net income) for and estimate of uncollectible accounts (bad debts).
Bad Debt Expense - Answer Reports the estimated amounts of this period's credit sales that
customers will fail to pay.
Days to Collect - Answer A measure of the average number of days from the time a sale is
made on account to the time it is collected
Direct Write-Off Method - Answer Records bad debt expense only when accounts are written
off; not allowed under GAAP.
Factoring - Answer An arrangement where receivables are sold to another company (called a
factor) for immediate cash (minus a factoring fee).
Interest Formula - Answer I = P X R X T, where I = interest calculated, P = Principal; R = annual
interest rate; and T = time period covered in the interest calculation (number of months out of
12).
Notes Receivable - Answer Promises that require other parties to pay the business according
to written agreements.
Percentage of Credit Sales Method - Answer Estimates bad debts based on the percentage of
sales expected to lead to bad debt losses. Also called the income statement approach.
Receivable Write-Off - Answer The act of removing an uncollectible account receivable and its
Correct Answers.
Accounts Receivable - Answer Amounts owed to a business by its customers.
Aging of Accounts Receivable Method - Answer Estimates uncollectible accounts based on the
age of each account receivable. also called the balance sheet approach.
Allowance Method - Answer A method of accounting that reduced accounts receivable (as
well as net income) for and estimate of uncollectible accounts (bad debts).
Bad Debt Expense - Answer Reports the estimated amounts of this period's credit sales that
customers will fail to pay.
Days to Collect - Answer A measure of the average number of days from the time a sale is
made on account to the time it is collected
Direct Write-Off Method - Answer Records bad debt expense only when accounts are written
off; not allowed under GAAP.
Factoring - Answer An arrangement where receivables are sold to another company (called a
factor) for immediate cash (minus a factoring fee).
Interest Formula - Answer I = P X R X T, where I = interest calculated, P = Principal; R = annual
interest rate; and T = time period covered in the interest calculation (number of months out of
12).
Notes Receivable - Answer Promises that require other parties to pay the business according
to written agreements.
Percentage of Credit Sales Method - Answer Estimates bad debts based on the percentage of
sales expected to lead to bad debt losses. Also called the income statement approach.
Receivable Write-Off - Answer The act of removing an uncollectible account receivable and its
