INTAC - CHAPTER 5 Flashcards
A method of estimating bad debts that focuses on the income statement rather than the statement of financial position is the allowance method based on
a. Direct writeoff
b. Aging the trade accounts receivable
c. Credit sales
d. Trade accounts receivable
c. Credit sales
A method of estimating uncollectible accounts that emphasizes asset valuation rather than income measurement is the allowance method based on
a. Aging of accounts receivable
b. Direct writeoff
c. Gross sales
d. Credit sales less returns and allowances
a. Aging of accounts receivable
The advantage of relating the bad debt experience to accounts receivable is that this approach
a. Gives a reasonably accurate measurement of accounts receivable in the statement of financial position.
b. Relates bad debt expense to the period of sale.
c. Is the only generally accepted method for measuring accounts receivable.
d. Makes estimates of uncollectible accounts unnecessary.
a. Gives a reasonably accurate measurement of accounts receivable in the statement of financial position.
Which is an accurate method of determining the amount of the adjustment to bad debt expense?
a. A percentage of sales adjusted for the balance in the allowance
b. A percentage of sales not adjusted for the balance in the
allowance
c. A percentage of accounts receivable not adjusted for the balance in the allowance
d. An amount derived from aging accounts receivable and not adjusted for the balance in the allowance
c. A percentage of accounts receivable not adjusted for the balance in the allowance
An entity uses the allowance method to recognize doubtful accounts expense. What is the effect of a collection of an account previously written off?
a. No effect on both allowance for doubtful accounts and doubtful accounts expense
b. No effect on allowance for doubtful accounts and
decrease in doubtful accounts expense
c. Increase in allowance for doubtful accounts and no effect on doubtful accounts expense
d. Increase in allowance for doubtful accounts and decrease in doubtful accounts expense
c. Increase in allowance for doubtful accounts and no effect on doubtful accounts expense
When an accounts receivable aging schedule is prepared, a series of computations is made to determine the estimated uncollectible accounts. The resulting amount from this aging schedule
a. When added to the total accounts written off during the year is the desired credit balance of the allowance for doubtful accounts at year-end.
b. Is the amount of doubtful accounts expense for the year
c. Is the amount that should be added to the beginning allowance for doubtful accounts to get the doubtful accounts expense for the year
d. Is the amount of desired credit balance of the allowance for doubtful accounts to be reported at year-end
d. Is the amount of desired credit balance of the allowance for doubtful accounts to be reported at year-end
When an aging approach is used for estimating uncollectible accounts
a. Bad debt expense is measured indirectly and the allowance for uncollectible accounts is measured directly
b. Bad debt expense is measured indirectly and the allowance for uncollectible accounts is measured
indirectly.
c. Bad debt expense is measured directly and the allowance for uncollectible accounts is measured directly.
d. Bad debt expense is measured directly and the allowance for uncollectible accounts is measured indirectly.
a. Bad debt expense is measured indirectly and the allowance for uncollectible accounts is measured directly
Which concept relates to the allowance method in accounting for uncollectible accounts receivable?
a. Bad debt expense is an estimate based on historical and prospective information.
b. Bad debt expense is the actual amount determined to be uncollectible.
c. Bad debt expense is an estimate based only on aging of accounts receivable.
d. Bad debt expense is management determination of which accounts are considered doubtful.
a. Bad debt expense is an estimate based on historical and prospective information.
Which of the following is not acceptable in estimating uncollectible accounts receivable?
a. The estimate of uncollectible accounts is based on a percentage of sales for the period.
b. The estimate of uncollectible accounts is based on a percentage of the accounts receivable at the end of a period.
c. The estimate of uncollectible accounts is based on an aging schedule.
d. No estimate of uncollectible accounts is made but accounts are written off when it is determined that the accounts cannot be collected.
d. No estimate of uncollectible accounts is made but accounts are written off when it is determined that the accounts cannot be collected.
The estimate of uncollectible accounts receivable based on a percentage of sales
a. Emphasizes measurement of the net realizable value of accounts receivable.
b. Emphasizes measurement of bad debt expense.
c. Emphasizes measurement of total assets.
d. Is only acceptable for tax purposes.
b. Emphasizes measurement of bad debt expense.
Which method of determining bad debt expense does not match expense and revenue?
a. Charging bad debts with a percentage of sales under the allowance method
b. Charging bad debts with a percentage of accounts receivable under the allowance method
c. Charging bad debts with an amount derived from aging the accounts receivable under the allowance method
d. Charging bad debts as accounts are written off as uncollectible
d. Charging bad debts as accounts are written off as uncollectible
Which method of determining bad debt expense most closely matches expense to revenue?
a. Charging bad debts only as accounts are written off as uncollectible.
b. Charging bad debts with a percentage of sales of that period.
c. Estimating the allowance for doubtful accounts as a percentage of accounts receivable.
d. Estimating the allowance for doubtful accounts by aging the accounts receivable.
b. Charging bad debts with a percentage of sales of that period.
A debit balance in the allowance for doubtful accounts
a. Should never occur.
b. Is always the result of management not providing a large enough allowance in order to manage earnings.
c. May occur before the year-end adjustment for uncollectible accounts.
d. May exist even after the year-end adjustment for uncollectible accounts.
c. May occur before the year-end adjustment for uncollectible accounts.
Which is not permitted in accounting for uncollectible accounts receivable?
a. Percentage of accounts receivable
b. Percentage of sales
c. Direct writeoff method
d. Aging of accounts receivable
c. Direct writeoff method
