ch 7readings Flashcards
Companies allow customers to pay for products using third-party credit cards because: (Check all that apply.)
the seller avoids the risk of customer non-payment.
the seller does not have to evaluate customer credit.
a variety of payment options typically increase sales volume.
cash is received from the credit card company faster than from a credit customer.
Zion Company sells merchandise on credit to BRC, Inc. in the amount of $1,200. The entry to record this sale would include a: (Check all that apply.)
debit to Accounts Receivable.
credit to Sales.
On July 10, Yao Co. collects $740 from Ean, Inc. from a prior credit sale. This entry would be recorded by Yao with a: (Check all that apply.)
debit to Cash.
credit to Accounts Receivable.
To record a sale on account, the company should debit:
Accounts Receivable.
Iron Company collects cash in full from a customer who purchased merchandise last month on credit. To record the receipt of cash, Iron Company should make the following entries in the general journal. (Check all that apply.)
True or false: The direct write-off method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.
false
A company estimates that $1,000 of its accounts receivable is uncollectible at the end of the period and will make the following adjusting entry: (Check all that apply).
Credit to Allowance for Doubtful Accounts
Debit to Bad Debts Expense for $1,000
P. Jameson Co. sold $500 of merchandise on Master Card credit sales. The net cash receipts from the sale are immediately deposited in the seller’s bank account. Master Card charges a 4% fee. The journal entry to record this sales transaction would include a: (Check all that apply).
debit to Credit Card Expense for $20.
debit to Cash for $480.
credit to Sales for $500.
Zino Company determines that a customer balance of $200,from Hollis Co. is uncollectible. Zino uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a:
debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
A company has $150,000 of credit sales during the year and estimates that $1,000 of its accounts receivable will be uncollectible. The adjusting entry will include a credit to:
Allowance for Doubtful Accounts
The expected proceeds from accounts receivable, determined by taking accounts receivable less the allowance for doubtful accounts, is called:
realizable value
JD Co. had $1,000 of credit cards sales. The net cash receipts were deposited immediately into JD Company’s bank account less a 3% fee. The entry to record this sales transaction would include the following debit entries. (Check all that apply.)
Credit Card Expense for $30
Cash for $970
Acel Co. uses the allowance method to account for bad debts. In January, Acel determined that it could not collect $400 from CTR, Inc. and wrote the balance off. On October 21, Acel received a check for $400 from CTR. The entries to record the receipt of cash on October 21 would include a debit to:
Select two answers.
Multiple select question.
Allowance for D
Accounts Receivable.
Cash.
A company estimates that $1,000 of its accounts receivable is uncollectible at the end of the period and will make the following adjusting entry: (Check all that apply).
Credit to Allowance for Doubtful Accounts
Debit to Bad Debts Expense for $1,000
When an account previously written off is later collected, two journal entries are required. The first journal entry is to _____ the account, and the second journal entry is to record _____ of payment.
reinstate, receipt
At year-end, Yates Company estimates that $1,500 of its accounts receivable balance is uncollectible. Yates uses the allowance method to account for bad debts. The entry to record this adjusting entry would include a:
debit to Bad Debts Expense and credit to Allowance for Doubtful Accounts
The __________ method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date.
aging of receivables
Ana Co. uses the allowance method to account for bad debts. At the end of the period, Ana’s unadjusted trial balance shows an accounts receivable balance of $40,000; allowance for doubtful accounts balance of $300 (credit); and sales of $500,000. Based on history, Ana estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of:
40,000*2%=800-300
Lani Co. uses the allowance method to account for bad debts. At the end of the year, their unadjusted trial balance shows an accounts receivable balance of $400,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,200,000. Based on history, Lani estimates that bad debts will be 1% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:
Reason: $400,000 x 1% = 4,000 + 400 = $4,400
