Accounting chapter 14

Question 1

Uncollectible accounts

Answer 1

accounts receivable that cannot be collected

Question 2

some businesses refer to uncollectible accounts as bad debts.

Answer 2

true

Question 3

allowance method

Answer 3

Crediting the estimated value of uncollectible accounts
to a contra account

Question 4

book value

Answer 4

The difference between an asset’s account balance and
its related contra account balance

Question 5

book value of accounts receivable

Answer 5

The difference between the balance of Accounts
Receivable and its contra account, Allowance for
Uncollectible Accounts,

Question 6

net realizable value.

Answer 6

The amount of accounts receivable a business expects
to collect

Question 7

percent of sales method

Answer 7

assumes that a percent of
credit sales will become uncollectible.

Question 8

percent of accounts receivable method

Answer 8

analysis of accounts receivable to estimate the amount that
will be uncollectible.

Question 9

aging of accounts receivable.

Answer 9

Analyzing accounts receivable according to when they
are due

Question 10

writing off an account.

Answer 10

Canceling the balance of a customer account
because the customer does not pay

Question 11

promissory note.

Answer 11

A written and signed promise to pay a sum of money at a specified time

Question 12

creditor.

Answer 12

A person or business to whom a liability is owed

Question 13

note payable.

Answer 13

A promissory note signed by a business and given to a creditor is entered in
the businesses books

Question 14

note receivable.

Answer 14

A promissory note that a business accepts from a customer is entered in the
business’s books

Question 15

notes.

Answer 15

Notes payable and notes receivable are frequently referred to simply

Question 16

maker of a note.

Answer 16

The person or business that signs a note, and thus promises to make
payment,

Question 17

payee.

Answer 17

The person or business to whom the amount of a note is payable

Question 18

principal.

Answer 18

The original amount of a note, sometimes referred to as the face amount,

Question 19

interest rate.

Answer 19

The percent of the principal that is due for the use of the funds secured by
a note

Question 20

maturity date.

Answer 20

The date on which the principal of a note is due to be repaid

Question 21

time of a note, or term.

Answer 21

The length of time from the signing date to the maturity date,
usually expressed as the number of days,

Question 22

interest income.

Answer 22

The interest earned on money loaned

Question 23

dishonored note.

Answer 23

a note that is not paid when due

Question 24

The expense of an uncollectible account should be recorded in the accounting period that the account becomes uncollectible.

Answer 24

false

Question 25

The account, Allowance for Uncollectible Accounts, has a normal credit balance.

Answer 25

true

Question 26

A business usually knows at the end of the fiscal year which customer accounts will become uncollectible.

Answer 26

false

Question 27

The account, Allowance for Uncollectible Accounts, is reported on the income statement.

Answer 27

false

Question 28

The book value of accounts receivable must be a reasonable and unbiased estimate of the money the business expects to collect in the future.

Answer 28

true

Question 29

The percent of sales method of estimating uncollectible accounts expense assumes that a portion of every dollar of sales on account will become uncollectible.

Answer 29

TRUE`

Question 30

The accounting concept, Conservatism, is applied when the process of making accounting estimates is free from bias.

Answer 30

false

Question 31

The percent of each age group of an accounts receivable aging that is expected to become uncollectible is determined by the Securities and Exchange Commission.

Answer 31

false

Question 32

The adjusting entry for uncollectible accounts does not affect the balance of the Accounts Receivable account.

Answer 32

true

Question 33

A business having a $300.00 credit balance in Allowance for Uncollectible Accounts and estimating its uncollectible accounts to be $4,000.00 would record a $4,300.00 credit to Allowance for Uncollectible Accounts.

Answer 33

false

Question 34

When an account is written off as uncollectible, the business sends the customer a credit memo.

Answer 34

false

Question 35

When a customer account is written off under the allowance method, book value of accounts receivable decreases.

Answer 35

false

Question 36

The direct write-off method of accounting for uncollectible accounts does not comply with GAAP.

Answer 36

true

Question 37

When a previously written-off account is collected, Accounts Receivable is both debited and credited for the amount collected.

Answer 37

true

Question 38

A note provides the business with legal evidence of the debt should it be necessary to go to court to collect.

Answer 38

true

Question 39

Total assets are reduced when a business accepts a note receivable from a customer needing an extension of time to pay an account receivable.

Answer 39

false

Question 40

Interest rates are stated as a percentage of the principal.

Answer 40

true

Question 41

Interest income is classified as an Other Revenue account.

Answer 41

true

Question 42

The method for calculating interest is the same for notes payable and notes receivable.

Answer 42

true

Question 43

Interest income should not be recorded on a dishonored note receivable.

Answer 43

false