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- 1. Multiple ChoiceWhich of the following statements is true?Accounts receivable are liabilities.Notes receivable usually have longer collection terms than accounts receivable.Accounts receivable are more liquid than cash.Notes receivable are always classified as current assets.
- 2. Multiple ChoiceWhen a company is using the direct write-off method, and an account is written off, the journal entry consists of a ________.credit to Accounts Receivable and a debit to Bad Debts Expensedebit to the Allowance for Bad Debts and a credit to Accounts Receivabledebit to Accounts Receivable and a credit to Cashcredit to Accounts Receivable and a debit to Interest Expense
- 3. Multiple ChoiceWhich of the following statements is true of the direct write-off method?It results in more accurate net income than any other method.It is only suitable for small companies that have very few uncollectible receivables.GAAP requires public companies to follow the direct write-off method.It provides better matching of revenues with expenses.
- 4. Multiple ChoiceTwo methods of estimating uncollectible receivables are ________.the allowance method and the amortization methodthe gross-up method and the direct write-off methodthe direct write-off method and the percent-of-completion methodthe aging-of-accounts-receivable method and the percent-of-sales method
- 5. Multiple ChoiceDean Art is a new business. During its first year of operations, credit sales were $41,000 and collections of credit sales were $34,000. One account, $725, was written off. Management uses the aging-of-receivables method to account for bad debts expense and estimated $500 as uncollectible at year end. The ending balance of the Allowance for Bad Debts is ________.
$500
$505
$1,225$1,230 - 6. Multiple ChoiceAt the beginning of 2017, Elixir, Inc. has the following account balances:
Accounts Receivable $42,000 (debit balance)
Allowance for Bad Debts $7,000 (credit balance)
Bad Debts Expense $0
During the year, credit sales amounted to $800,000. Cash collected on credit sales amounted to $770,000, and $18,000 has been written off. At the end of the year, the company adjusted for bad debts expense using the percent-of-sales method and applied a rate, based on past history, of 2.5%. The ending balance in the Allowance for Bad Debts is ________.
$2,000
$7,000
$8,250
$9,000 - 7. Multiple ChoiceThe entity that signs the promissory note and promises to pay the required amount is the ________.maker of the noteholder of the notepayee of the notebanker of the note
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