Accounting 201Chapter 05 Practice Test

Question 1

The allowance method is required under Generally Accepted Accounting Principles, because it is consistent with:
A) The revenue recognition principle.
B) Properly recognizing the net realizable value of assets.
C) Good business practice.
D) Cash-basis accounting.

Answer 1

B

Question 2

If a company uses the allowance method of accounting for uncollectible accounts and writes off a specific account,
A) Net accounts receivable increase.
B) Net accounts receivable decrease.
C) Net accounts receivable do not change.
D) The effect on net account receivables depends on the relationship between the allowance account balance and the amount of the write off

Answer 2

C

Question 3

Which of the following is true for a company who uses the allowance method of accounting for uncollectible accounts?
A) Bad debt expense is recorded during the year of the credit sale.
B) Bad debt expense is recorded when a specific account is know to be uncollectible.
C) Bad debt expense is recorded after all of the current year’s credit sales are collected.
D) Bad debt expense is only recorded if they exceed 10% of credit sales.

Answer 3

A

Question 4

Weiner Company's net credit sales were $500,000 during 2010. On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a debit of $500 and that Weiner estimates that 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be: 
A) $5,000. 
B) $5,100. 
C) $5,600. 
D) $6,100.

Answer 4

D

Question 5

Refer to the information in the previous question. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a credit of $500 and that Weiner estimates that 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be: 
A) $5,000. 
B) $5,100. 
C) $5,600. 
D) $6,100.

Answer 5

B

Question 7

On April 1, 2012, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are receivable on March 31, 2013. On March 31, 2013, Nelson Inc. will record interest revenue of: 
A) $8,000. 
B) $6,000. 
C) $2,000. 
D) $0.

Answer 7

C

Question 8

Refer to the information in the previous question. On December 31, 2012, Nelsen will accrue interest revenue of: 
A) $8,000. 
B) $6,000. 
C) $2,000. 
D) $0.

Answer 8

B

Question 9

The entry to record the estimate for uncollectible accounts includes:
A) A debit to Allowance for Uncollectible Accounts.
B) A credit to Accounts Receivable.
C) A debit to Sales Revenue.
D) A debit to Bad Debt Expense.

Answer 9

D

Question 10

Schmidt Company's accounts receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net realizable value of accounts receivable is: 
A) $ 96,000. 
B) $ 96,200. 
C) $100,000. 
D) $104,000.

Answer 10

A

Question 11

When a company collects a previously written off account:
A) The balance of Accounts Receivable will increase.
B) The balance of Allowance for Uncollectible Accounts will increase.
C) The balance of Bad Debt Expense will decrease.
D) The balance of Service Revenue will increase.

Answer 11

B

Question 12

A sales discount is recorded by the seller as A) An expense. B) A contra asset. C) A contra revenue. D) A liability.

Answer 12

C