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- 1. Multiple-choice30 seconds1 ptWhich 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-choice30 seconds1 ptWhen 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-choice30 seconds1 ptWhich 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-choice30 seconds1 ptTwo 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-choice30 seconds1 ptDean 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-choice30 seconds1 ptAt 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-choice30 seconds1 ptThe 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
