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Exam 16: Accounting for Accounts Receivable

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Question 31

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Under the direct write-off method, the bad debt expense is recognized before it has been determined that an account is uncollectible.

A) True
B) False

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Question 32

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After aging the accounts receivable, it is estimated that $1,200 will not be collected and the allowance account has an existing credit balance of $400. If the accounts receivable total $130,000, the net receivables would be

A) $128,800.
B) $129,600.
C) $128,400.
D) $128,000.

E) A) and B)
F) A) and C)

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Question 33

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Most firms are able to increase sales by extending credit to customers.

The percentage of sales method emphasizes proper estimating and reporting of bad debt expense on the income statement and the matching of expenses with revenues.

The percentage of receivables method is often referred to as aging the receivables.

Match the terms with the definitions. -A loss from failure to collect an account receivable.

Match the terms with the definitions. -The amount a business expects to collect from its accounts receivable; calculated as Accounts Receivable less Allowance for Bad Debts.

When it is possible to make a reasonable estimate of the amount of uncollectible accounts, the allowance method is preferred for financial reporting purposes.

Whenever a company elects to make sales on account, it is inevitable that some receivables will become uncollectible.

Match the terms with the definitions. -A technique that attempts to recognize bad debt expense in the same period that the related credit sales are made.

A detailed analysis of the accounts receivable to determine the length of time each account has been outstanding is called

The direct write-off method is simple to apply.

The term "net receivables" refers to the difference between Accounts Receivable and Allowance for Bad Debts.

On the balance sheet, any account having a balance intended to be deducted from another related account balance for financial statement purposes is known as a(n)

Texas Roundup uses the direct write-off method in accounting for uncollectible accounts. ​ Required: Record the above transactions in general journal form.

The amount of the year-end adjustment for Allowance for Bad Debts is equal to the aging percent of uncollectible accounts multiplied by the amount of accounts receivable.

The percentage of receivables method of estimating uncollectible accounts is based on the relationship between the amount of accounts payable and the amount of uncollectible accounts.

Aging the receivables is often referred to as the percentage of sales method.

Under the percentage of sales method, the credit sales are analyzed to estimate the amount that will not be collected.

The expense associated with an uncollectible account is recognized when it has been determined that a customer will not pay the amount owed under the